In what may substantially increase duty on solar equipment imports, largely from countries such as China, the Director General of Trade Remedies (DGTR) in the commerce ministry has favoured continued imposition of safeguard duty on imports of solar cells, whether or not assembled in modules or panels.

The DGTR's recommendation will now go to the finance ministry that may finally decide and notify the quantum and period of the duty.

In its final findings of a review investigation for continuation of the 15 per cent safeguard duty, the DGTR concluded that between April and September 2019, there has been an increase in imports of solar cells due to reduction in duty from July 2019, causing serious injury to the domestic industry.

It said though the domestic industry has improved its production and sales but its condition remains fragile and, therefore, there is strong case for continuation of the safeguard duty, especially for countries such as China , Thailand and Vietnam.

However, other countries such as Malaysia and Indonesia are exempted from the safeguard duty as imports from these countries do not exceed 3 per cent individually and 9 per cent collectively, the DGTR has said in its final findings on the investigation for continuation of safeguard duty.

The DGTR has recommended safeguard duty at 14.90 per cent for the first six months with the duty coming down to 14.5 per cent thereafter. The current safeguard duty was levied in July 2018 at 25 per cent that had come down to 15 per cent, gradually falling every six months. The current duty is set to expire on July 29.

If safeguard duty (SGD) is extended, it would be a double whammy for solar equipment importers in the country as the power ministry has stated that 20-25 per cent basic customs duty on solar modules and 15-20 per cent duty on solar cells may be levied from August. If this levy continues with SGD, the total tax component on solar gear imports could come closer to 50 per cent.

The safeguard duty was imposed from July 30, 2018 for a period of two years to protect the domestic industry against dumping of cheap equipment , especially from countries like China that commands over 80 per cent of India's market for solar gear. The duty was set at 25% for the first year, followed by a phased-down approach for the second year, with the rate reduced by 5% every six months until it ends in July, 2020.

The DGTR initiated an investigation in March 2020 to see if there was a need to extend the safeguard duty beyond its deadline following an application filed by the Indian Solar Manufacturers Association.