BENGALURU: The Director General (Safeguards) has recommended imposing a 70% safeguard duty on imported solar cells , panels and modules for a minimum period of 200 days, likely dealing another blow for developers who bid for projects at progressively lower prices.Responding to a complaint from domestic solar manufacturers, DG (Safeguards) Sandeep M Bhatnagar carried out a preliminary enquiry after which he agreed that “critical circumstances very much exist warranting the immediate imposition of safeguard measures.”The Indian Solar Manufacturers Association had filed a petition on December 5, seeking the imposition of safeguard duty on imported solar equipment because their prospects were being hurt.The preliminary findings will be followed by a public hearing on the matter, after which a report will be sent to a panel of secretaries of the commerce, revenue, industrial policy, external affairs and new and renewable energy for a final decision.Safeguard duty is a temporary relief provided when imports of a product increase unexpectedly to a point where they threaten domestic manufacturers of similar products. It is distinct from countervailing duty and anti-dumping duty, which are also used to protect the local industry.If safeguard duty is imposed, it would be the second blow for solar developers . Since last September, the Central Board of Excise and Customs has sought to reclassify imported solar panels and modules in a category that attracts 7.5% duty and various kinds of cess.While this matter is being sorted out, the safeguard duty suggested has set off panic among solar developers, who have bid for projects at progressively lower tariffs over the past three years. Their input costs will go up steeply if the findings are accepted.“The cost of a solar cell, around 30 cents at present, will go up to around 50 cents for Indian developers if 70% safeguard duty is imposed,” said a developer who did not want to be identified. “The cost of solar power will accordingly go up to around Rs 7 per unit. Which discom will buy power at that price? Local manufacturers will have shot themselves in the foot as no one will buy their equipment either since there will be no projects. In the short term, the solar segment has had it.”Solar tariffs offered at auctions touched a record low of Rs 2.44 per unit last May and range between Rs 2.50 and 3.50 per unit. Comparatively, coal-based tariffs are between Rs 2 and 3 a unit.The DG Safeguards’ enquiry found that imports of solar panels and modules – primarily from China, but also from Malaysia, Taiwan and Singapore – skyrocketed between 2014-15 and 2017-18, while the market share of domestic industry declined. Imports have risen to 9,474 MW in 2017-18 (annualised), a seven-fold increase from levels in 2014-15.The market share of imported solar equipment widened to 90% from 86% in this time, while that of domestic manufacturers shrank to 7% from 13% as India’s solar programme expanded dramatically, with Prime Minister Narendra Modi setting an ambitious target of 100,000 MW of solar capacity by 2022. India’s solar capacity was about 15,600 MW at the end of October.The findings noted that China’s exports of solar panels and modules to India were 18.51% of such shipments in the first half of 2016 and expanded to 38.77% in the first half of 2017. At the same time, the share of its exports of similar material to the US and EU declined to barely 5% from 30.65%.“China started targeting the Indian market more vigorously as compared to developed countries,” the report says. This was because both the US and the EU introduced anti-dumping duty and countervailing duty on these Chinese products.The DG Safeguards noted that a provision requiring 10% of projects set up under the Jawaharlal Nehru National Solar Mission to exclusively use domestic solar equipment was scrapped after the US complained to the World Trade Organization. Subsequently, capacity utilisation of local manufacturers fell to 51% in 2017-18 from 78% in 2016-17.The findings underline that local manufacturers can’t compete with imported equipment on cost either. Although the cost of both imported and domestic solar panels and modules has fallen, indigenous equipment still remains substantially more expensive. As a result, local manufacturers are suffering from widening losses.“Domestic industry is faced with a significant loss of potential employment opportunities (while) the productivity per employee has also shown a declining trend,” the report said.A separate petition by local manufacturers to impose anti-dumping duty on imported solar panels and modules is being heard by the Directorate of Anti-Dumping and Allied Duties.