CleanTech/ Renewable Energy, Other, solar

Tata Power Solar could write off manufacturing investments if government does not act against Chinese imports

According to reports, Tata Power, Moser Baer demand 40% import duty to save investments in domestic capacity

Solar photovoltaic (PV) module manufacturers such as Tata Power Solar, Moser Baer and others have demanded a 35 to 40 per cent import duty on the solar power generating crystalline modules imported from China on the lines of similar anti-dumping duty imposed by the US.

“Chinese firms are selling PV modules below even the cash cost of production. They want to show high export numbers so that state-owned banks do not call in their loans and in the hope that they will eventually be given a debt waiver. Realising this, the US has already imposed anti-dumping duty on Chinese imports, and the European Union (EU) is investigating Chinese firms for causing harm to domestic industry by exporting goods below the cost of production. If India does not take a call on protecting domestic industry from predatory pricing and unfair competition, we too have to take a call on phasing out our solar cell manufacturing capacity and writing down the investment,” said Ajay K Goel, chief executive officer of Tata Power Solar.

He alleged that a Chinese cartel controls prices of photovoltaic modules and a study done by firms shows that the highly leveraged Chinese firms are surviving merely by not servicing their debt obligations.

Hit by cheap Chinese exports, global MNCs such as General Electric, Siemens, Bosch and BP Solar have exited the business globally and research on new solar technologies, which can reduce the cost of generation per unit, has dried up.

“With manufacturers unable to make a return on the existing investments it is hard to go to the board to get fresh investments. In fact, funding has dried up for people to even take new technology from pilot to production stage,” said Goel.

“Influx of Chinese solar panels and equipment is an extremely serious problem inflicting the domestic industry. More than Rs 85,000 crore worth investment made by solar equipment makers is mostly lying dormant owing to these imports from China,” Deepak Puri, chairman and managing director of Moser Baer told Financial Chronicle.

The government has already invited public comments acting on the domestic manufacturers complaint. Tata Power Solar, which at one point was deriving almost 75 per cent of its revenues from exports, has now seen its share drop to nil.

A senior official at the union ministry of commerce said, “It is a fact that solar equipment makers in India have approached us and brought to our notice the problem of Chinese dumping their products below cost price. We have begun an inquiry on dumping of solar panels and equipment from China. We will complete our investigation in next 90 days. Only after that some action can be taken.”

Last month, union minister for new and renewable energy Farooq Abdullah had said that there was no proposal for a blanket ban on foreign manufactured solar cells in India. Under the Jawaharlal Nehru National Solar Mission (JNNSM) programme, the government has also stipulated that solar PV cells/modules used in grid-connected solar power projects taken up under phase-I of the JNNSM, should be manufactured in the country if based on crystalline silicon technology. But so far according to MNRE’s latest information, of a total capacity of 268 MWp of grid-connected solar PV power plants set up under JNNSM as of end October 2012, plants with 120 MWp aggregate capacity are using domestically produced module. Of the off-grid solar PV systems with aggregate capacity of 31 MWp deployed under JNNSM, 99 per cent are using domestically produced modules.

“We need to have level playing field vis-à-vis our Chinese counterparts. They get government grants and huge subsidies to support export of their products to countries like India. Also, Chinese equipment makers have access to cheap credit ranging from 2 per cent to 6 per cent per annum whereas we pay up to 13 per cent on borrowings. There is no level-playing field,” said Puri of Moser Baer.

Puri’s chief marketing officer, Vivek Chaturvedi added, “Having 4-5 gw of manufacturing capacity in India across the value chain is one of the two main objectives of JNNSM, these imports have put this objectives of JNNSM at risk. It has jeopardised cumulative investment in thousands of crores and 25,000 jobs in our country. Indian solar manufacturing industry is in dire straits because of unfair competition from our neighbouring countries.

In the year ended March 2012, Tata Power Solar production of solar cells more than halved from 54,482 kw in the previous year to 22,538 kw. Similarly the production of solar modules was 55,977 kw in financial year 2011-12 as against 75,194 kw in the previous year.

“If the government does not take necessary action in the next three to four months, we may look at writing off part of our investments of around Rs 350-400 crore on manufacturing of modules that were initially planned for exports and later for the National Solar Mission launched in 2011,” said Goel. He feels that with the next phase of the National Solar Mission about to be launched, this is the right inflection point that may decide the fate of domestic manufacturing.

Tata Power Solar has mothballed around half of its total PV manufacturing capacity and is operating at only around 10 per cent to 15 per cent of the total installed capacity. “Even we find it cheaper to buy modules from China than produce them in-house. In fact, if the government is not supportive, we too may be forced to relocate or set up a plant in China where free land and loans are available,” said Goel. The Chinese dumping has even forced companies such as Moser Baer Solar to look at financial restructuring of its debt load.

“The cost of production in China is no different from India, but the badge of honour in China is exports. For companies to secure government loans, what matters is the volume of exports and not the price of products,” said Goel.

However, experts point out that imposition of anti-dumping duty would result in short-term pain for solar power producers. “If anti-dumping duties are imposed, Indian solar projects, which are selected based on the lowest bids, will not be able to procure cheap panels, which would mean two things: 1) the bids will have to go up and the government has to pay more in tariffs to compensate for the higher priced modules, or 2) a lot of projects will fail because they are not profitable,” Raj Prabhu, managing partner of Mercom Capital Group told Financial Chronicle.



One thought on “Tata Power Solar could write off manufacturing investments if government does not act against Chinese imports

  1. before imposing the duty, ask why Tata BP solar which was enjoying the export is now crying…. every country wants to export so whats wrong ? If china is gifting us why not take it….. we are talking about low price, let Government provide low cost debt fund to these manufacturers and let these manufacturers sell the panels at Chinese prices prevailant today…… this is all an useless argument, if these sick and poor corporate governance management continues which was living on IPO listing (except Tata BP solar) money without any foresight nor buying good quality equipment to reduce the price without any control on raw material price….. what India should do is to start promoting the Polysilicon, wafers to match chinese price……. existing cell and module capacity is enough as the developers do not have money to build 20 GW, so why cry on china when we know that we cant arrange finance…..Let us stop these IPO listing greed with politicians as proxy promoters, then, we will have good scenario with PPA instead of reverse bidding….. let government provide low cost debt fund, then, throw challenge on raw material and mass production….. any ways the existing PV cell technology is going to modify and these companies in any way have to write off their depreciated equipment investment, so, again a case to look for “Farmer loan wavier” mela for these industrialists….

    Posted by praveen Kulkarni | January 24, 2013, 7:23 pm

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