The notification by the Finance Ministry to put on safeguard duty on imported solar panels will lead to increase in tariffs of future projects in India as well as affect competitiveness of the overall power sector, says a study by a research institute. The research body called Energy and Resources Institute says that the development will also likely lead to higher Average Power Purchase Cost (APPC) for buying the utilities as well as higher costs for consumers.

More than 90 percent of Imported Solar Panels as well as modules that are being utilized in the Indian solar projects generally come from China as well as Malaysia. The proposed duty on Imported Solar Panels is perhaps intended to provide protection to domestic solar panel production from the different impacts due to the increased imports, TERI has announced in a statement.

“The levying of safeguard duty may not help domestic industry. It would, on other hand, increase costs of solar power, make it less attractive to buying utilities, and jeopardise pace of growth of development in solar power, which, otherwise, needs to be boosted up at this juncture in order to achieve national targets for the solar capacity as well as our commitments – Nationally Determined Contributions – to UN Climate Convention,” says Ajay Mathur, the TERI Director General.

He further said that a better option in order to promote domestic industry will be for the government to procure competitively, for its own use and utilization, solar electricity generated only from domestically manufactured panels. According to the Ministry of New and Renewable Energy (MNRE), the domestic manufacturing capacity of solar cells as well as the solar modules is around 3.1 and 8.8 GW, respectively, whereas 1.5 GW of solar cells and 2–3 GW of solar panels are usually installed annually. Moreover, only 10 percent of such installations are able to use such domestic cells as well as modules.

The duty is based on investigation by Directorate General of Trade Remedies (DGTR) that recommended it in the form of 25 percent on Imported Solar Panels from China as well as Malaysia for 1 year. This is to be followed by 20 percent for the proceeding 6 months, and then 15 percent for the later 6 months. The probe was in reply to complaint from Indian Solar Manufacturing Association (ISMA) which said that cheap and Imported Solar Panels were badly impacting the domestic solar industry.