Renewable energy is identified as a champion sector under the Make in India 2.0 programme.
With increasing significance for renewable energy, the government is resorting to trade remedies to encourage domestic industries.
However, this needs a relook in the long term context and requires a consideration for policy change.
What is the concern with renewable energy sector?
India currently meets almost 90% of its annual requirement of solar panels through imports (mainly China).
This impedes the growth of a nascent domestic solar manufacturing sector.
Policy support for the solar sector is increasingly focussed on domestic manufacturing.
These take the form of both capital subsidies and considerations of trade regulation.
However, these interventions are doubted to be the right kind of signals to send to an already uncertain solar sector.
Compliance with global trade regime and keeping up the ambitions on renewable energy (RE) are also doubted.
What are the concerns and priorities in this regard?
Trade remedies - Trade remedies are attractive because they create tangible short-term benefits.
These include job creation, reduction in trade deficit, and higher local tax collection.
However, it would result in higher tariffs and make solar power less attractive for the already financially strained and RE-sceptical utilities.
The newer victim of anti-competition implications for trade remedies has thus been clean energy.
Two large solar energy markets, India and US, have either imposed or are contemplating to impose safeguards duty on solar panels.
These protectionist measures are accompanied by diplomatic tensions, encouraging other major economies also to retaliate.
Trade Regime - Previous measures to assuage the concerns of the domestic solar manufacturers were challenged and overturned at the WTO.
These include the domestic content requirement or DCR scheme.
The DCR scheme did not impose any restrictions on imported sources.
It only sought to secure an assured market for domestically manufactured panels.
But other countries opposed the scheme as it discriminated against foreign solar cell suppliers.
Prioritising domestic goals without complying with international trade rules affects the much-needed stakeholder confidence.
It is hence vital that India remains compliant with the global trade regime.
Governance - India’s solar sector is currently caught in inter-ministerial cross-fire.
Both Ministry of Finance (safeguard duties) and Ministry of Commerce and Industry (anti-dumping duties) have the power to implement trade remedies.
Further, the Ministry of New and Renewable Energy is grappling with issues posed by the MoF.
This is regarding the re-classification of solar panels as electrical motors (the current classification is photosensitive semiconductor devices), imposing additional duties and cesses on importers.
Coordination - The industry needs one unified voice representing the key concerns of each stakeholder-category.
Developers and manufacturers need to voice their needs clearly and respond to policy implications in an unequivocal manner.
However this should be without ignoring the broader interests of the sector.
What is the way forward?
Trade remedies to back domestic manufacturing industry may not prove to be effective in the long run.
The government could instead tilt its green manufacturing mix in favour of nascent industries of the future.
This may comprise of energy storage, electric vehicles, and IT solutions for grid integration.
To get ahead in that race, India will need a comprehensive strategy on issues such as:
effective sourcing of critical minerals
investment in R&D
access to patient venture capital (long term capital)
fiscal benefits for the industries of the future
An inter-ministerial committee headed by the MNRE must be constituted.
This is to coordinate moves among the MoF, MoCI, Ministry of Power, and Central and State Electricity Regulatory Commissions.
