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Madras HC stays safeguard duty on solar power equipment

Bengaluru: The Madras High Court has issued a temporary stay on a preliminary report of the Director General of Safeguards recommending imposition of 70% safeguard duty on imported solar equipment.

Shapoorji Pallonji Infrastructure, a contractor-cum-developer of solar projects and part of the Shapoorji Pallonji Group, had petitioned the court against the recommendation, maintaining the company was never given a chance to respond to the original petition on the basis of which DG (Safeguards) suggested imposing 70% duty.

The DG had on December 19 last year sent a notice to all stakeholders saying it had initiated an enquiry into the matter on the basis of a petition filed by Indian Solar Manufacturers Association claiming that large-scale imports of solar panels and modules from China, Malaysia, Taiwan and Singapore were causing "serious injury" to domestic manufacturers of similar equipment.

The notice gave stakeholders 30 days to reply. However, the DG (Safeguards) announced preliminary findings on January 5.

"Much prior to the expiry of 30 days, the impugned preliminary findings have been rendered, which is contrary to the procedure stipulated," Justice TS Sivagnanam said in his order.  "The status quo, which is prevailing as on date, shall continue and no further precipitate action, shall be taken," it said.

Solar developers prefer imported equipment because they are 25-30% cheaper than domestic ones, thanks to economies of scale and government subsidies in the exporting countries.

Independent Solar Power Producers Alliance, an association of solar developers, too, has filed a petition in Delhi HC seeking a stay on the recommendation.

The petition is yet to be heard. Although the recommendation of DG (Safeguards) is preliminary, there is a provision in the Customs Tariff Act for it to be immediately imposed, pending a final decision by the secretaries of relevant departments. That is why Shapoorji Pallonji and ISPPA rushed to court for relief.

DG's preliminary recommendation will be followed by a public hearing on the matter, after which a report will be sent to a panel of secretaries of commerce, revenue, industrial policy, external affairs and new and renewable energy for a final decision.

In its petition before Delhi High Court, ISPPA questioned the legitimacy of ISMA, which filed the petition that DG (Safeguards) acted upon, noting that it comprised just five solar manufacturers whose production capacity was barely 7.5% of the entire solar manufacturing sector in the country.

It also claimed that domestic solar manufacturing capacity was barely 10% of their requirements for solar projects - considering the ambitious target of 100,000 MW of solar capacity by 2022 that India was pursuing - which forced developers to import, and the imposition of such steep duty would derail the effort.

It also noted that a separate petition, again filed by ISMA, seeking anti-dumping duty on imported solar equipment was pending before the Directorate General of Antidumping and Allied Duties (DGAD) which had held a public hearing on the matter.