India may jump into an escalating U.S.-China trade fight over solar energy as local manufacturers lobby New Delhi for protection against imports from rivals including First Solar Inc. and Suntech Power Holdings Co.
India may initiate an anti-dumping probe in a month focused on imports of Chinese solar products, China’s Commerce Ministry said in a statement yesterday. India’s Commerce Secretary Rahul Khullar declined to comment in a phone call.
Indian manufacturers are also seeking a 15 percent tariff on imports of thin-film solar panels, the country’s Renewable Energy Ministry Secretary Tarun Kapoor said in an interview. The biggest thin-film panel company is Tempe, Arizona-based First Solar.
Indian suppliers such as Tata BP Solar India Ltd., Indosolar Ltd. and Moser Baer India Ltd. have failed to benefit from a rule intended to spawn a domestic manufacturing hub in one of the world’s fastest-growing markets.
Instead, low-cost Chinese rivals like Suntech and Trina Solar Ltd. and U.S. firms backed by preferential trade finance including First Solar have reaped most of the equipment orders for 1,100 megawatts of plants to be built by January.
“It’s a disaster in the making,” said K. Subramanya, chief executive officer of Tata BP Solar, 51 percent-owned by BP Plc and India’s third-biggest cell and panel maker. “I’m feeling a bit of anguish because we want solar to succeed but we need fair competition.”
Default, Stalled Production
Local manufacturers have received almost no orders from developers building plants in India and are producing far below their factories’ full capacity, Subramanya said. India’s total manufacturing capacity is about 1,500 megawatts of panels and 500 megawatts of cells, according to Bloomberg New Energy Finance.
Indosolar, the nation’s biggest cell company, stopped production in June and has defaulted on 2.75 billion rupees ($52 million) of long-term bank loans as its business became “unviable,” Fitch Ratings analysts Vivek Jain and Salil Garg said in a Dec. 5 note. They attributed the company’s problems to a 62 percent plunge this year in the selling price of cells to about 52 cents a watt amid intense Chinese competition and declining demand in Europe where governments cut subsidies.
“We’re on the same wavelength as the U.S. manufacturers,” Indosolar Managing Director H. Rahul Gupta said by phone, referring to an Oct. 19 complaint lodged by Bonn-based SolarWorld AG’s U.S. unit and six unidentified U.S. companies.
The complaint alleged Beijing uses cash grants, raw-materials discounts, preferential loans, tax incentives and currency manipulation to boost exports of solar cells.
U.S. Suppliers Targeted
The Indian complaints extend to both U.S. and Chinese exporters.
U.S. and Chinese suppliers have benefited from Indian orders because of cheap credit provided by state-backed lenders, said Anmol Singh Jaggi, director of Gensol Consultants Pvt., which advises project developers.
Indian projects that import U.S. equipment may be eligible for loans from the Export-Import Bank of the U.S., which charges about 3 percent to 4 percent interest. After hedging, the cost of borrowing comes to about 9 percent compared with 13 percent if they buy and borrow locally, he said.
In some cases, state-backed Chinese companies are offering to supply equipment and get paid two years later, he said.
“No Indian company can match that,” Jaggi said. “Without U.S. and Chinese credit, we wouldn’t have any solar projects getting built.”
U.S. and Chinese imports can be brought into the country tax-free, whereas Indian manufacturers have to pay duties on raw materials to make the same products. U.S. panel makers including First Solar and Abound Solar Inc. have also benefited from an exemption for thin-film products in the government’s Solar Mission program that requires developers to use local equipment.
“Those are anomalies that must be addressed,” Gupta said.
Indian manufacturers have asked the renewable ministry to waive duties on raw materials and supplies and to impose a 15 percent tariff on imports of thin-film panels, the ministry’s Kapoor said by phone from New Delhi.
“Maintaining open markets globally is critical to making solar an affordable and meaningful part of the energy mix,” Alan Bernheimer, a First Solar spokesman, said in an interview. He wouldn’t discuss the Indian trade complaints because the company hasn’t seen any details of the proposals.
The U.S. International Trade Commission on Dec. 2 took the first step toward imposing added tariffs on Chinese solar imports, voting unanimously on the petition that called for anti-dumping and countervailing duties. The commission is now holding a full investigation.