The finance ministry has proposed to levy a 70-per cent safeguard duty on solar power equipment imported from countries like China for 200 days to protect domestic industry from "serious injury".
The decision follows a 5 January recommendation by the Directorate General of Safeguards that solar cells are "being imported into India in such increased quantities and under such conditions so as to cause or threaten to cause serious injury to the domestic industry manufacturing like or directly competitive products."
This has placed local manufacturers in "critical circumstances", which justify the immediate imposition of a provisional safeguard duty on imported solar gear so as to save local units from further serious injury, which would be difficult to repair if safeguard measure is delayed, the DGS said.
Acting on an application jointly filed by five domestic solar cell and module manufacturers, including Adani Group, the DGS recommended "a provisional safeguard duty be imposed at the rate of 70 per cent ad valorem on the imports of solar cells whether or not assembled in modules or panels."
Besides the Adani-backed Mundra Solar PV Ltd, the aggrieved solar gear manufacturers included Indosolar Ltd, Jupiter Solar Power Ltd, Websol Energy Systems Ltd and Helios Photo Voltaic Ltd.
It also recommend that the provisional safeguard duty be levied for a period of 200 days, "which is considered to be the minimum period of time required to protect the interests of the domestic industry."
The finance ministry accepted the recommendations of the DGS and decided to levy safeguard duty accordingly.
Before final duties or import taxes are levied, DGS will hold further investigation into the injury caused by cheap imports. It would also hold a public hearing on the issue.
India's solar gear imports jumped from 1,271 MW in 2014-15 to 4,186 MW in the next year and to 6,375 MW in 2016-17.
This is because India has annual manufacturing capacity for solar cells of only around 3 gigawatts as against its requirement of 20 GW.
Current fiscal imports are pegged at 9,474 MW as compared to domestic production of 1,164 MW.
"The growth rate of such imports as a percentage of the domestic production was a remarkable 1,371 per cent during the intervening year 2015-16.
"Even the overall growth rate of the imports relative to its domestic production is very significant, rising from 519 per cent in 2014-15 to 814 per cent in 2017-18," it said.
Meanwhile, China's exports of solar power equipment to India, which was a paltry 1.52 per cent of its total global exports during 2012, increased to 21.58 per cent during 2016.
During the first half of 2016, Chinese exports to India were 18.51 per cent of its total exports while the combined exports to EU and the US were 30.65 per cent of its total exports.
The situation turned dramatically during the succeeding two half yearly periods. In the second half of 2016, China's exports to India constituted 25.09 per cent while its exports to EU and USA fell to 15.12 per cent.
Again, in the first half of 2017, China's exports to India increased to a staggering 38.77 per cent of its total exports while its exports to EU and the US shrunk to just 5 per cent (of its total exports), it said.
"Such a significant shift in pattern of trade in which China started targeting the Indian market more vigorously as compared to developed countries / markets like EU and USA etc could not have been foreseen," DGS said.