China is the world’s economic warehouse for manufactured goods and like many other sectors, has engulfed the global solar products manufacturing.
It already accounts for 80 percent of market share in this category and now it has begun capturing the Indian solar equipment market, which rightly belongs to local manufacturers who are trying their best to meet the demand of a rapidly rising Indian economy.
The Indian Solar Manufacturers Association (ISMA), an apex body representing the solar equipment manufacturers is fighting a bitter battle to make its members voice heard and rightly so against this onslaught of Chinese equipment.
“Currently the Indian Solar Program is China centric, who has taken nearly 90% of market share directly or indirectly through their off-shore companies. This has far reaching consequences,” ISMA tells EnergyInfraPost.com.
China has an installed manufacturing capacity of 95GW for cells and 105GW for modules. Add to this their capacity enhancement programs, which easily tops 12 to 15GW of new capacities every year. Even factoring rationalization of older production lines, they add nearly 10GW every year.
Against this, their internal consumption was only 54GW in 2017. Naturally the rest of 60GW was made for and had to be sold in International markets.
“Were these global markets remunerative to Chinese manufacturers? Considering their prices and the state of Balance sheets of most leading companies, it is evident that the Chinese manufacturers incurred losses in increasing their market shares and domination,” ISMA pointed out.
A Balance sheet analysis of the top 11 Chinese solar manufacturers over 5 years, reflect that 9 companies sold at average negative margins. They were not recovering full costs, and this was additionally validated by Antidumpinginvestigations and subsequent imposition of duties by USA and EU, way back in 2012-13.
“Do they have a different credit and risk appraisal system or there is Institutional support from State of China, to facilitate achieving long term strategic goals. Government support and ownership of the losses is very evident and was also reflected in CVD investigation carried out by the US government,” ISMA said adding that the manufacturers in other parts of the world are left to compete against the might of the second largest Economy.
Nobody will call it a fair trade practice and a fair market war.
BEWARE OF THE CHINESE DRAGON
According to ISMA, this cycle continues with mechanical precision and total predictability, in new and developing markets of the world.
Japan, Australia, Turkey and India are investigating Anti-dumping and safeguard petition filed by their local Solar manufacturer’s Associations and trade bodies.
It accused the Chinese government of unleashing its trade might to enter into government to government negotiations and influence the tariff decisions of the target country.
Secondly the trade beneficiaries of their cheap imports, who are normally solar power developers, rise in tandem to develop a very influential lobby and create a narrative to support cheaper Chinese imports over the domestic manufacturing in their country.
ISMA believes that the State of China desires to strategically control Solar Product manufacturing in the world and the local companies are doing its bidding and thinks that India cannot afford to lose this war.
According to ISMA, the Indian Solar Mission has a target to achieve 100 GW of power by 2020. At current prices and import trends, it will result in net foreign exchange outflow of INR 2.44 Lakh Crore, approximately USD 45 billion.
Solar power is a strategic need for the country as solar power can potentially save USD 20 billion in fossil fuel imports annually by 2030. This can only happen by promoting Solar manufacturing in India and not perpetuating dependence on imports from China.
The trade experiences highlight the pitfalls of complete dependence on China for Indian Solar Mission. It has been experienced and widely reported that Chinese manufacturers arbitrarily increase prices and change terms of deliveries midway through contracts.
This is only an early reflection of what may happen if Indian Solar mission is made completely dependent on Chinese supplies. In this context one can draw reference from the dispute with trading partners as evidenced in the case of China’s rare earth supply to Japan.
This will have a significant impact on trade deficit. Solar products import if not corrected will have a drain of USD 43 billion by 2020 through imports from China.
A comprehensive regime of Safeguard duty against imports of cells and modules from China will result in immediate investments in manufacturing capacities in India, both by Indian and Chinese manufacturers.
The Industry estimates that within 18 to 24 months India will have an integrated Solar manufacturing Eco system with an annual capacity of 15GW. This will result in additional employment generation of 250,000 employees.
This will result in India becoming a viable supply base of solar products for global markets. Potential estimates vary between 1.5 to 2 billion USD of exports annually.
We all are aware that the governments of the day are not swayed by immediate imperatives but are guided by medium and long term interest of the country.
Clearly they will like to follow the example of Automobile industry where substantial support to domestic industry at the early growth stage enabled it to become a globally competitive Industry.
Today the Automobile Industry is around $93 billion and contributes to around 7.1 % to India’s GDP and employs 29 million people.
The inflection point in Solar Industry is here and what the future generations will experience will depend upon which we decide to go, being trader or manufacturers.
Latest posts by Team EnergyInfraPost (see all)
- Cabinet approves Policy Framework to Promote and Incentivize Enhanced Recovery Methods for Oil and Gas - September 12, 2018
- European Energy Major Statkraft Acquires The Tidong Hydropower Project In India - September 5, 2018
- Adani Group enters Retail Electricity Distribution Business with Largest Private Network - August 29, 2018