The Commerce Ministry on Monday recommended imposing a 25 per cent duty on imports of solar cells and modules from China for one year to try to counter what it sees as a threat to domestic solar equipment manufacturing.

Falling prices of solar cells and modules, over 90 per cent of which the country imports from China, have triggered a decline in the cost of solar power generation and led Indians increasingly to adopt the technology.

The ministry plans to make renewable power account for 40 per cent of its total installed capacity by 2030, from 20 per cent currently.

The proposed safeguard duty, which would apply for two years in total to imports from China and Malaysia, would be reduced in the second year to 20 per cent for six months and then 15 per cent for six months. The proposed duty is less than the 70 per cent recommended by the authorities in January.

The recommendation, published by the ministry and is to be submitted to the government for approval, is intended to address a serious threat to the domestic solar manufacturing industry from Chinese imports, the directorate general of trade remedies (DGTR) said in the report.

Unhealthy competition

India’s solar cell and module manufacturers said cheap Chinese imports were hurting the domestic industry, while Chinese manufacturers say “imports are helping India accelerate its renewable energy adoption programme.

“Solar module manufacturers are facing tough and unhealthy competition from imported modules,” said the North India Module Manufacturer Association in the report.

The China Chamber of Commerce for Imports and Exports of Machinery and Electronic Products said the “real cause of injury to the domestic industry is aggressive pricing practices of other Indian producers and not imports.”

Trade relations between the two nations have thawed recently despite fears of a trade war elsewhere, with the two sides discussing ways to increase Indian sales of farm products and India pushing China to give access to its software service firms.

However, the trade deficit has widened to $62.9 billion in China's favour, an over nine-fold increase over the last decade.

India's share in China's exports of solar cells and modules rose from about a fifth in the first half of 2016 to two-fifths a year later, the DGTR wrote, adding that China had “started targeting the Indian market more vigorously.”

Some Indian solar power generators, like Avaada Ltd, have expressed reservations about the duties. A safeguard duty would put solar projects worth more than Rs 1 lakh crore ($14.59 billion) in jeopardy, Avaada told DGTR.