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OPINION- Sky high duties will blister solar industry

New Delhi: The directorate general of safeguards has proposed a steep 70% duty on imports of solar modules, citing "serious injury" to domestic industry. This calls for reconsideration. 

High penal duties would actually harm domestic manufacturers of solar cells and modules, for these would merely lead to spurious value addition behind high tariff walls. 

Worse, the penal action would preclude gains from trade, and adversely affect downstream design, construction and operations of solar power plants. We must not cultivate a solar modules industry that is not cost-competitive.

True, there has been a surge in imports of solar cells and modules since 2014-15, mostly from China, thanks to proactive policy on renewable energy and the attendant uptick in demand. 

Reports say that almost 90% of domestic demand for solar panels is now met by imports. But steep safeguard duties are hardly the way to boost domestic competitive advantage and 'make in India'. 

The way forward is to design a package of measures to improve the technical and financial capacity of domestic producers to meet rising demand in what remains a sunrise industry with high growth potential.

The proposed penal duties are to be applied prospectively, and would not impact ongoing projects. But we do need clear-cut policy to avert creating a high-cost solar cells industry. In its preliminary investigation report, the directorate has noted that Chinese solar imports have slowed in other countries. 

And the reason cited is higher duties that have lately been imposed by both the European Union and the US on Chinese solar imports. We do need to probe dumping, and line up remedial action. But the task of purposefully shoring up national competitive advantage in solar cells remains.

[This piece appeared as an editorial opinion in the print edition of The Economic Times.]