Rising Solar Trade Deficit: Should India Start Worrying?
It’s elating to see India mark a shining presence in the global map of renewable energy achievement. At the same time, it’s a bit troubling to witness the domestic manufacturers struggling their way to keep up in the game.
In a report released by ‘Bridge to India’ recently, the top three solar module supplier turn out to be foreign based. Trina Solar stands at the top position with 25.7 per cent market share, Hanwha with 10.5 per cent share and Risen with around 7.6 per cent market share respectively. To add to that, all these players have gained a significant market share over the last year.
At the same time the domestic manufacturers’ combined market share fell to 10.6 per cent with none of them making it to the list of top 10 suppliers for the first time.
Over the last few years, the imports of solar cells and modules have been rising at a growing rate. During the 11-month period, India exported solar modules and cells worth $69 million and imported worth $3.2 billion. Compared to the same period in 2015, solar imports have grown by 36 percent, whereas exports have declined by 60 percent.
Amongst this scenario, China stands to be the highest exporter with a market share of almost 86.6 percent. Therefore, it would not be incorrect to say that India’s trade deficit in solar sector has been rising with imports increasing at a much faster and stronger pace then the exports.
As the foreign companies flood the Indian market with ‘cheap’ solar cells and modules, the ‘Make in India’ initiative for solar manufacturers’ stands disdained.
So what is hindering the growth of these manufacturers, despite huge thrust for clean energy in the market? There are two factors at play - one, the fighting of the whole Beijing phenomena, implying how the market is being flooded with the cheap foreign imports. Second is the fault in our own making, which hints towards the development of the local manufacturing capabilities and expertise.
Vinay Rustagi, MD, Bridge to India, says how the Indian manufacturers are unable to compete with the international suppliers as most of them have sub-scale and obsolete operations, combined with higher cost of financing, power, land etc.
There is no doubt that Indian solar sector has come a long way with some major achievements. The sector is attracting huge interest from Indian and international investors but weakness in manufacturing is becoming a major concern.
“Lack of domestic manufacturing expertise makes Indian solar growth unsustainable and at risk from external factors”, adds Vinay.
Technically, we have around 104 module manufacturers with a manufacturing capacity of 5.7 gigawatts (GW). The cell manufacturing capacity at the same time is only 1.4 GW. Therefore, the domestic cell manufacturing is inadequate to cater to the 5.7GW of module capacity, due to lack of raw materials, technology, and skilled workforce.
Speaking of the external factors, recently, the withdrawal of the Domestic Content Requirement (DCR) policy left the domestic manufacturers high and dry. The Indian solar manufacturers have filed an anti-dumping petition recently with the Ministry of Trade and Commerce against the Chinese solar modules and cells hoping an interim duty will be levied, according to Mercom’s industry sources. This filing comes in the wake of India losing the World Trade Organization case which ruled that India’s localization rules discriminate against US manufacturers. As a result, tenders with a DCR have mostly been either withdrawn or cancelled, negatively affecting local manufacturers.
Indian manufacturers have been struggling badly in the wake of drastic fall in module prices and the address to the petition seems bleak.
“Considering that cheaper Chinese modules are fueling Indian solar installations and have brought down tariffs to record low levels and the fact that the previous anti-dumping case was closed without a tariff imposition, it is difficult to see this petition going far. Anti-dumping cases are also not a short-term remedy and take years to complete”, says the Mercom report.
With the cancellation of the Indian government’s DCR policy, the industry is yet to see any alternative support measure for the sector so far, says Vinay.
Its trouble spell for the industry as 90 per cent of the module requirement in the country is met by imports. In such a scenario we need a long term policy, R&D infrastructure, expertise to address the sustainability of our market, as hailed by the experts. Even if the government takes care of issues like anti-dumping, it is mere shifting of the burden from the domestic manufacturers to the project developers or the Discoms, as told by Raj Prabhu, CEO, Mercom Capital to money control in an interview.
We have a huge advantage of the ever growing demand in renewable. Cashing on to that, our domestic manufacturers have a huge opportunity to not only become sustainable, cost competitive but world class as well, given the right kind of push from the government. They need to work all the way up through the underdeveloped supply chain.
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