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Solar Safeguard Duty- Shock and Awe Tactics, Who’s The Enemy?

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Our current policy makers are earning quite the reputation with their shock and awe tactics. Of course the overnight demonetization in November 2016 will go down in history books as something that de-stabilized our economy and brought life to a general stand still.

Frustratingly, our policy makers are using the same abruptness across various sectors.

Speaking specifically of the solar industry and MNRE-  take for example, various roof-top subsidy policies that were running in states such as Delhi and Punjab. Delhi’s IPGCL had empanelled vendors until 30th June 2018 plus an additional 6 months for project execution. Punjab’s PEDA’s empanellment was to be until 24th September. However, a crisp mail was received by vendors in the third week of June that empanellment would be truncated on 30th June. No consideration for the lakhs that solar companies had invested in bank guarantees for these tenders and the advances that consumers had paid for subsidized installation.

No discussion, no debate- just a half page order from MNRE.

A more recent, anticipated, policy may just be the final nail in the coffin for many in the Indian Solar industry. In the name of protecting domestic solar panel manufacturers, there are murmurs that the DG (Safeguards) may abruptly implement a 30-40% safeguard import duty on solar cells and panels. This rumor was relayed to the writer on July 11th, and implementation is expected as soon as July 25th.

Fact is that 90% of all solar panel manufacturers in India either import solar cells, or manufacture panels in SEZs (which will count as imports) or both. This policy if implemented, will immediately result in at least a 20% increase in solar project costs. Imagine the impact on projects that are currently under construction or financial closure or those who have bid in Bhadla and UP?

Further, given that domestic cell manufacturers only contribute to less than 10% of the solar market, this policy if implemented, will effectively kill business in the solar industry over this financial year. Such abrupt implementation will benefit neither employment, not Shri Modi’s lofty targets of 100 GW solar.

Who will benefit? Maybe only a certain conglomerate that has set up a 1 GW solar cell manufacturing facility in Mundra. A few of the other has-been cell manufacturers such as Websol or Indo Solar are not known for their quality. Thus effectively, such brash policy implementation will give the certain conglomerate the ability to monopolize and govern market prices.

Now let us assume if this same policy is introduced in a proper planned manner- giving the industry heads-up of at least 365 days, we will have time to prepare and adjust. It could do wonders in terms of increased sales in the interim period. Further the industry would make efforts to build their supply chain and manufacturing capabilities to procure domestically manufactured solar cells.

In summary, the proposed safeguard duty, if implemented with immediate effect will have adverse effects such as slowing down of the Indian Solar industry and subsequent unemployment. If however, the government implements the policy in a planned manner, it can stimulate domestic manufacturing.

And finally, dear policy makers, shock and awe tactics are great when used against an enemy. The domestic solar industry is not the enemy.

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