If India’s anti-dumping duty petition results in the introduction of trade barriers without other policy level reforms, it will fail to achieve its original goal of supporting domestic manufacturers, according to a report by consultancy firm Bridge to India.
Instead, the consultancy said duties alone are unlikely to have any enduring benefits for domestic manufacturing “beyond throwing a financial lifeline to existing manufacturers”. It also questioned the ability of duties to prevent Chinese manufacturers, who dominate Indian module supply, to circumvent duties by setting up manufacturing in other countries.
There has been talk of allocating multi-gigawatts of Central Public Sector Undertaking (CPSU) solar projects to domestic manufacturers, but the sector is still awaiting a clear policy, beyond duties, that can drive the local industry.
In any case, Bridge to India said the petition has created “huge uncertainty for the entire solar sector” and comes at time when an “already reeling” downstream industry is facing extra costs from the Goods and Services Tax (GST), a slowdown in tender activity and an increase in module prices.
Noting a 3 percent fall in project returns if a 30 percent duty level were imposed, Bridge to India said: “The petition is a major risk to the viability of all pipeline projects, where modules have not yet arrived on site.”
Meanwhile, if provisional duties were imposed with no recourse for developers, they would also raise the risk not just of project completion delays but even of abandonment.
In event of duties coming in, Bridge to India said the best scenario would be if projects auctioned before the petition in July 2017 are grandfathered or if their extra costs are compensated for by the central government. However, the firm said the probability of such an outcome is “at best 50 percent”.
Projects auctioned while the decision is still pending will also be affected as developers face the challenge of correctly pricing risk. They have to decide between continuing overly aggressive bids just to win capacity or bidding for higher tariffs and causing the distribution companies (Discoms) to reel at the higher power costs and possibly to refuse to sign PPAs – a Discom tactic that has already been employed in many tenders of late.
