What is the issue?
- 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.
Source: The Hindu
