India Dumping Duties Risk Choking Modi’s Solar Revolution

Photographer: Dhiraj Singh/Bloomberg

A SolPac D160 solar field, comprising of parabolic solar concentrating reflector dishes developed by Thermax Ltd., stands at the Mahindra & Mahindra Ltd. manufacturing plant in Chakan, Maharashtra, India. Close

A SolPac D160 solar field, comprising of parabolic solar concentrating reflector dishes... Read More

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Photographer: Dhiraj Singh/Bloomberg

A SolPac D160 solar field, comprising of parabolic solar concentrating reflector dishes developed by Thermax Ltd., stands at the Mahindra & Mahindra Ltd. manufacturing plant in Chakan, Maharashtra, India.

The Indian government may strangle Prime Minister Narendra Modi’s efforts to reap more electricity from the sun should it impose duties on solar panel imports proposed by the nation’s previous administration.

Only a quarter of the 1.6 gigawatts of solar capacity in the works now will be finished if the levies are enacted, said Headway Solar Pvt., an industry consultant based in Gurgaon, near New Delhi. The tax would double the cost of solar power, according to the Solar Power Developers’ Association.

The estimates are aimed at pushing Modi’s government away from backing a recommendation to impose the duty, which would protect India’s few solar cell producers from cheaper Chinese and U.S. imports. Modi must balance the needs of those manufacturers led by Indosolar Ltd. (ISLR) and Websol Energy Systems Ltd. against the interests of panel makers and developers that benefit from cheaper cells.

“It’s a nasty, poisoned gift from the outgoing administration to the incoming one,” said Tobias Engelmeier, founder of Delhi-based consultancy Bridge to India Energy Pvt., who says everything from solar lanterns in rural villages to large grid-connected generators will become uneconomical. “It’s going to deflate the market terribly.”

Photographer: Vivek Prakash/Bloomberg

The Welspun Energy Ltd. solar power plant in Neemuch. India has built photovoltaic plants capable of powering more than 6 million homes since 2010, mostly using equipment imported from the U.S., China, Malaysia and Taiwan. Developers led by Welspun Energy Ltd. have used imported panels for 80 percent of that capacity. Close

The Welspun Energy Ltd. solar power plant in Neemuch. India has built photovoltaic... Read More

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Photographer: Vivek Prakash/Bloomberg

The Welspun Energy Ltd. solar power plant in Neemuch. India has built photovoltaic plants capable of powering more than 6 million homes since 2010, mostly using equipment imported from the U.S., China, Malaysia and Taiwan. Developers led by Welspun Energy Ltd. have used imported panels for 80 percent of that capacity.

Finance Minister Arun Jaitley, appointed by Modi after a landslide election victory on May 16, has until Aug. 22 to implement the duties favored by the Ministry of Commerce & Industry. Officials in charge of clean-energy policy oppose tariffs but say there’s little they can do.

Imported Equipment

“Our role is very limited as we can’t go to court against another ministry,” said Tarun Kapoor, joint secretary in the Ministry of New and Renewable Energy.

India has built photovoltaic plants capable of powering more than 6 million homes since 2010, mostly using equipment imported from the U.S., China, Malaysia and Taiwan. Developers led by Welspun Energy Ltd. and Azure Power India Pvt. have used imported panels for 80 percent of that capacity.

Modi, who pioneered large-scale solar development in 2009 as chief minister of his home state, Gujarat, has vowed to harness solar power to reduce blackouts and ensure energy security. His party pledges to run everything from street lights and farm irrigation pumps to lightbulbs in every Indian home by 2019 on the sun’s energy.

The commerce ministry recommended anti-dumping duties ranging from 11 cents to 81 cents per watt on imports. That would double the price of solar power to 12 rupees (20 cents) per kilowatt-hour, said the Solar Power Developers’ Association. Bridge to India calculates a smaller 10 percent escalation that would still kill many projects because they were won on thin margins in auctions, according to Engelmeier.

Impact Debated

India’s cell makers dispute those estimates, saying the duties would have a negligible impact on solar power prices. The cost would rise about 0.1 rupee a kilowatt-hour, said Pradeep Kheruka, vice chairman of Borosil Glass Works (BRSL) Ltd., a supplier to panel makers and spokesman for the Indian Solar Manufacturers’ Association.

Even so, it’s not certain there’s enough solar capacity in the world outside China and the U.S. to make up for the imports India is seeking to curtail. China controls about 70 percent of the world’s panel-making capacity, and First Solar Inc. (FSLR) of the U.S. much of the remainder.

Indian makers of cells -- the basic building blocks of panels -- say they can produce about 1 gigawatt a year of the technology. The renewable ministry’s Kapoor says that’s not enough to keep pace with India’s plans to quadruple its photovoltaic power capacity in the next three years.

The shares of Websol and Indosolar have almost doubled since the commerce ministry recommended tariffs on May 22. Websol closed at a two-year high of 18.09 rupees on the BSE Ltd., formerly known as the Bombay Stock Exchange Ltd. Indosolar advanced 4.8 percent to 3.93 rupees.

Japan Demand

“It’s not possible to import from other countries -- the capacity is not there,” said Vikalp Mundra, joint managing director of Ujaas Energy Ltd. (UJEL), which won a license to build a solar project in central Madhya Pradesh state in a February auction. He notes that Japan is consuming more panels than its companies such as Sharp Corp. (6753) can produce.

India’s solar manufacturers idled more than 70 percent of their capacity in the past few years, unable to compete in a global market during a four-year supply glut. If orders are placed, they can resume full production within 45 days, according to a statement last month by the Indian Solar Manufacturers’ Association.

Already, developers are scaling back work. BlackRock Inc.- backed SunEdison Inc. (SUNE) dropped a 20-megawatt solar power project it won in a government auction in February on concerns that local cell makers won’t be able to boost supply in time. The St. Peters, Missouri-based company lost its bidding deposit of 20 million rupees.

Local Makers

Also caught in the dispute are local panel makers such as Waaree Energies Ltd., which need to import cells that go into modules that make up panels. Waaree Chairman Hitesh Doshi didn’t respond to a phone call and text message seeking comment.

Chinese manufacturers got government subsidies that allowed them to build up massive capacities and undercut rivals, said Ratul Puri, a former executive director at panel maker Moser Baer India Ltd. (MBI) who now heads power plant-developer Hindustan Powerprojects Pvt., echoing arguments by U.S. and European governments to levy duties on Chinese solar imports.

“Legally, everything stacks up,” said Puri, whose company has mostly used Chinese panels at its solar projects. “But is it in the public interest? That’s the dilemma.”

(An earlier version of this story was corrected to show more accurate stock quotes after one of the two data feeds from the stock exchange delayed in reporting prices.)

To contact the reporter on this story: Natalie Obiko Pearson in New Delhi at npearson7@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net

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