India has proposed a 25% two-year safeguard duty on solar cells from China, Malaysia to protect domestic manufacturing.

India’s plan to cut imports of Chinese solar cells and modules by imposing a safeguard duty may have the opposite effect in the short run, according to ICBC International Research Ltd.

Stockpiles could rise rapidly as Indian developers hoard more modules before the proposal to impose a 25 per cent safeguard tariff is expected to take effect in the next two to three months, ICBC’s Hong Kong-based analysts including Harry Wong said in an emailed note Thursday. The South Asian nation will continue to rely heavily on imports from China over the next one to two years as imports will remain cheaper than domestic production even with the tariff.

India’s expansion of manufacturing capacity “has been sluggish due to higher development cost and hence it is hard for current capacity to catch up with the downstream demand” arising from the government’s target to install 100 gigawatts by 2022, Wong said. The tariff is likely to harm domestic project developers, raising costs by at least 12 per cent, without affecting China’s position as the key supplier of panels and modules.

The country earlier this week recommended a two-year safeguard duty on solar cells from China and Malaysia to protect its nascent domestic manufacturing industry. India’s annual solar cell manufacturing capacity of 3 gigawatts means it can only meet 15 per cent of its annual installation target of 20 gigawatts, the Ministry of New & Renewable Energy estimated last year.

The South Asian nation accounted for 31 per cent of China’s total solar exports in 2017 becoming its largest buyer, according to the China Chamber of Commerce for Import and Export of Machinery and Electronic Products.”- Bloomberg

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