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Local sourcing clause may go for solar projects

According to reports, India may drop the condition of local-buying of components in the next batch of solar power projects under the national solar mission, once penal duties are imposed on import of solar panels.

The Commerce Ministry is likely to propose steep anti-dumping duties on import of solar panels on manufacturers from China, Taiwan, Malaysia and the US in its investigation report on dumping to be submitted on Thursday.

The US, on the other hand, may successfully get a dispute settlement panel established against India’s local sourcing norms in solar projects at the World Trade Organisation just a day later on May 23.

“We don’t think there is a need to continue with the local sourcing norms in our solar projects if anti-dumping duties are imposed on solar panels. It is foolish to pursue something that could be effectively challenged at the WTO when we have a legitimate reason to restrict imports by imposing higher duties,” a Commerce Ministry official told Business Line.

A final decision on anti-dumping duties is taken by the Finance Ministry.

India is keen to protect its fledgling solar equipment manufacturing industry against competition from established players in countries such as China, the US, Taiwan and Malaysia. The Ministry of New & Renewable Energy, therefore, introduced a local buying clause in projects granted under the Jawaharlal Nehru National Solar Mission partly funded by the Government.

The clause, which makes it compulsory for solar power producers to buy a part of the components used by them locally, has been challenged by the US. It has accused India of discriminating against foreign players.

Indian manufacturers of solar equipment, however, are getting hit by the flood of cheap imports in the domestic market.

Imports are happening despite the local input condition because in the first phase of the solar mission, solar panels based on thin-film technology were exempt while in the second phase (first batch) half of the projects are outside the ambit of local sourcing.

As per the Directorate General of Anti-Dumping (DGAD) disclosure statement published last week, the “dumped imports’’ of solar panels from China, Taiwan, Malaysia and the US had increased in absolute terms and also in relation to production and consumption of goods in India.

According to industry estimates, the DGAD would propose duties ranging from 50-60 per cent from the US to 100-110 per cent from China.

Anti-dumping duties are imposed when it is conclusively proved that exporters from a particular country were selling products at prices lower than what they were offering in their local markets.

Imports of solar products have increased more than 40 per cent from 800 MW of generation capacity in 2012-13 to 1.4 GW in 2013-14, according to Indian Solar Manufacturers’ Association. This has resulted in 70 per cent domestic capacities lying idle and estimated losses of ₹1,000 crore to the domestic industry.

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