Can Entire Solar Sector Could be Punished Just Because of 5-10 Companies ? By: Bhupesh Trivedi

India is a country where a handful of companies or people can hold everybody else to ransom. The latest episode is of five solar cell manufacturers jeopardising the energy security needs of power consumers and a hundred thousand jobs in the just-maturing solar power sector. And, the Directorate Generation of Trade Remedies in the central Ministry of Commerce and Industry is facilitating a massive-kill by imposing a 25 per cent safeguard duty on solar cells and modules imported from China and Malaysia.

Except Adani’s solar cell-manufacturing Mundra Solar PV Ltd, all others are old and remained unprofitable even after availing all kinds of subsidies and benefits during their inception stage. To help them survive for several years through non-market initiatives like domestic content requirement (DCR) tenders, safeguard duties or anti-dumping duties is plain stupid. This is even more stupid when such policy initiatives actually work against the basic tenet of the “Make In India” programme of creating more employment.

The latest announcement of safeguard duties of 25 per cent on solar cells and modules from China and Malaysia will protect barely few hundred jobs in the cell manufacturing companies, while it will destroy at least a hundred thousand jobs in the downstream project development, EPC, system integration and component manufacturing as well as trading companies.

The duty may not affect the very large utility scale projects for which PPAs have been signed or tenders already floated – The developers have the option to pass on the incremental cost back to the government-owned power distribution companies. But, the rapid scale up projects or future tenders will get affected. The sea of uncertainty will prevent or at least discourage further large-scale investments. Investments in India’s solar power projects come through international funds that seek annuity returns. And, uncertainties of this kind will affect the returns that investors expect.

The other logic that put forth in “national interest” is of foreign exchange that goes out from India to China. This too is an absolute stupid perspective when you look at the solar power sector holistically. Large-scale project development has attracted tonnes of foreign capital to investments in the country. If 60 per cent of these funds go back to China to buy solar cells and modules, the remaining 40 per cent still is retained within the local economy. This additional money supply creates a lot more jobs than the positions available at the five solar cell manufacturing companies.

Moreover, even in the rooftop segment, quite a bit of foreign funding is happening through equity and debt deals. We are able to attract cheap foreign funds that are fuelling local economic growth and creating energy security options for power offtakers – notably, the commercial and industrial users (C&I) who have been fleeced by power distribution companies to fund the vote banks of the political parties. Cheaper power for C&I will make them more competitive in the international market place, and thereby increase inflow of foreign exchange.

By adopting measures that benefit just five solar cell manufacturing, the government is destroying a hundred thousand jobs in the downstream solar segments, stopping cheap funds coming into the country and preventing the domestic C&I companies become more competitive.

And, Prime Minister Mr Narendra Modi needs to reaffirm his Mr Clean image by allaying doubts that his government favours the one and only Adani group. The safeguard duty effectively safeguards Adani’s investments in a stupid project of manufacturing cells in India.

There is an old adage – Why re-invent the wheel? But, companies like these Indian solar cell manufacturing ones, not only try to re-invent the wheel, but also put a spoke in the running wheels of the others.