Solar panel import duties: a sop for beleaguered coal
By James V Abraham (Founder and Director – SolarArise)
The Ministry of New and Renewable Energy (MNRE) recently sent a note to the Finance Ministry recommending import duties on solar panels. MNRE recommended a duty of 10% beginning January 2021, rising to 20% in January 2022, and then to 30% in January 2023. The stated goal is to increase local manufacturing of solar panels. The real goal is something else.
Look at the recent history of import duties. Last year, the government imposed a safeguard duty on solar panels from China starting at 25%. Despite these duties, panels continue to be imported from China and the local sector has not grown.
Some speculate that Indian panels are inferior. That’s not true. Indian-made panels are successful in many global markets with very stringent quality standards. Indian manufacturers enjoy a premium in those markets that they do not enjoy at home.
It’s not a quality gap, but a price gap. The safeguard duty was hefty, but was still insufficient to close that price gap. The proposed new duties will be just as ineffective.
Why is the government bothering?
Over the past decade, solar power tariffs have reduced far faster than anyone’s expectations. Today, unsubsidized solar power is available at tariffs lower than conventional coal power. Soon, storage technologies will allow us to deliver solar power throughout the day at rates that challenge any conventional power plant.
And that’s the problem.
Today’s conventional power plants, especially coal power plants, are bankrolled by the public-sector banks. Any challenge to those assets, especially from renewable assets, would further stress the banks’ balance sheets. Enter import duties, which simply add unnecessary costs that will continue to protect these coal plants (and these overburdened balance sheets).
The safeguard duty on solar panels did succeed in one area; it increased the tariff of solar power. What was once heading to a sub-Rs. 2 tariff, solar power tariffs are much higher today, giving some relief to the pressure on coal power.
The import duties were never designed to help local manufacturers of solar plants. Duties at approximately 20% are insufficient to close the gap with the Chinese competitors. They were designed to protect our outdated coal industry, and the banks who bank-rolled them.
It is time to let go of these plants and transition our grid, our sector, and our economy towards renewable power. This transition is going to be expensive. Import duties that act to delay it are only handing a bigger problem to our children.
Let’s support the solar manufacturers directly. Competing with the Chinese panel manufacturers is no easy proposition – the playing field is far far from level. If India is going to build a manufacturing sector in solar panels, the industry will need many levels of support. They require access to concessional finance, subsidized power and water, and other incentives to improve the cost-competitiveness of the industry. And the government exchequer has the necessary funds in the form of the National Clean Energy Fund.
It’s time to let conventional power be replaced by renewables, and let the market boom. After all, there’s no greater push for manufacturing than a booming domestic market.
Source: solar-arise
