The recent World Trade Organization ruling against the Indian government’s policies favouring local solar cell manufacturers does not seriously set back India’s solar mission, according to experts. India committed itself to switching over to greener sources of energy last year with its ambitious plan of installing 100 GW of solar capacity by 2022, expanding the original 20 GW target under the National Solar Mission launched in 2009, by five times.
The government proposed that a small amount of this capacity be developed through Domestic Content Requirement (DCR) in order to protect and promote the budding solar cell manufacturing industry in the country.
The US, however, objected to this requirement and filed a complaint in 2013 with the WTO, which has ruled in its favour and recently made its judgment public, observing that India’s policy does not conform to international trade agreements.
To arrive at a compromise, India proposed that it would buy DCR solar panels only for its own consumption (in railway and defence) and not for commercial purposes, but the US did not agree.
“The US is complaining because it fears that not only will the protectionist regime hurt American interest but that the DCR rule might form a precedent and what’s a small requirement today might become a bigger number tomorrow, and so it is important to contest to protect future American interest and also send out a signal to the Indian government should there be an attempt to replicate such a method on other sectors,” says Shashanka Panda, Founder-Chairman and CEO, Blue Earth Enterprise. India has decided to appeal against the WTO ruling, but the outcome may not be in its favour, argues Panda. “History has not favoured protectionist stances at the WTO. In fact, the US itself was hauled over the coals in a similar ruling by the WTO in 2014 where US had imposed anti-dumping duties on Chinese solar cells. WTO ruled against the protectionist stance of the US,” he said.
“India’s own response has toggled in the last couple of years. India, in September 2014, revoked the anti-dumping duty imposed on non-domestic content. A year later, in July 2015, India threatened the US with a warning of a ‘dumping’ probe in the very case. The toggling action is reflective of the divergent directions in which the solar manufacturers and the Independent Power Providers have been attempting to drag the solar policy. The latter want an open market sans protectionist stances so that they can buy the best solar PVs at best prices whereas the former want their revenues to be protected,” Panda added.
Meanwhile, Greenpeace India and Greenpeace USA have criticised the ruling in a joint statement, and backed the Indian government’s decision to appeal the ruling. “India’s setting of the DCR was based on a worthy core principle: increasing economic opportunities and creating thousands of green jobs in India while taking critically important steps in the global fight against climate change. It is ridiculous that the WTO does not recognise this principle, and points to the danger to developing countries that such international trade regimes pose,” said Pujarini Sen, campaigner, Greenpeace India, in a press statement.
Local manufacturing received an impetus after Prime Minister Narendra Modi’s Make in India push. Recently, the Bharat Solar Power Development Forum (BSPDF), floated by the RSS, announced that it wanted India to impose anti-dumping duty on imported solar cells and modules as well as focus on building capacity within the country. However, bringing local manufacturers at a par with foreign companies will take time, said Amit Bhandari, Fellow, Energy and Environment Studies at Gateway House: Indian Council on Global Relations.
“There are two options open to the government: one is to continue business as usual and second is to basically delay the programme until local manufacturers catch up, which is unfeasible,” he said. In fact, Bhandari argues that countries like US and China, from where chips are imported, are not just manufacturers but innovators as well, and they find it relatively easy to keep up to date with the rapidly changing solar cell technology. Without dedicated R&D, India loses out in this area.
Sanju Thomas, senior associate fellow and head, Centre For Solar Energy, however, argues that “Regarding efficiency, Indian products are equally good when compared to imported ones. We require more R&D funding in this sector to keep pace with the rapid growth of the sector,”
“The efforts of today’s R&D can reflect in five to 10 years when there will be further competition in the market,” he says.
“The problem is that companies which manufacture solar chips in India (like Indosolar and Moser Baer) are in very bad shape financially and, hence, they can no longer invest in large scale manufacturing or in new technology. The second set who could have potentially invested in large scale manufacturing would be the power generation companies but, again, these companies are also highly indebted and they do not have any experience of innovating in the high-tech area. It is an unfortunate situation but we don’t really have a very strong base in India,” Bhandari said. At the recent Surya Kranti Summit organised by Bharat Solar-Power Development Forum in New Delhi, Minister for New and Renewable Resources Piyush Goyal had said that the government is working on a policy to “promote large-scale domestic manufacturing of solar equipment for making it more competitive”.
The minister added: “We are trying to bring in a policy wherein we are thinking what support we can provide for large-scale production of equipment like silicon wafers. A policy in this regard is being considered which will be put up for Cabinet approval soon for quantum jump in domestic production of solar equipment.”
According to Thomas, better modes of disbursement of incentives and subsidies, encouraging new small-scale manufacturers under incubation of IITs or IIMs, and developing cluster manufacturing — a geographical location of interconnected companies that share infrastructure, services, and information — are other measures that could aid the nascent industry in India.
“We should always look at economies of scale, where increasing the volume of production brings better bargains on the price of raw materials, bringing down the per-unit price of energy,” Thomas adds. The MNRE should aim at engineering a win-win-win solar manufacturing policy under the Make in India flagship scheme, according to Panda. “India can encourage a joint manufacturing (foreign and domestic players) initiative contingent upon shareholding patterns that favour India’s domestic players while giving overall incentives for such a joint manufacturing regime. Both the domestic and foreign manufacturers win out of such a policy and so does India’s job market. We further believe that the quality of jobs would also improve —right now India’s domestic solar manufacturing sector is considered to be a low-investment sector that employs semi-skilled workers. This could change if a policy driven push could lead to India-Foreign systemic partnership in solar manufacturing, assuming of course that the best practices of foreign collaborators have an equal impact on the hiring they do,” he said.
Currently, according to reports, the manufacturing capacity of Indian solar cells and modules is 1,386 MW and 2,756 MW respectively, but a capacity of only 297 MW for cells and 1,304 MW for modules is under operation largely due the low demand for domestic products.