BREAKINGVIEWS-US solar dumping probe is India’s Icarus moment

By Shritama Bose

MUMBAI, Sept 24 (Reuters Breakingviews) - The American sun is burning Indian exporters. The United States is investigating a dumping complaint against solar firms, including Waaree Energies WAAN.NS and a unit of Adani Enterprises ADEL.NS. It could result in triple-digit tariffs on the industry, which sends almost all its $2 billion of exports a year stateside. It speaks to the limits of New Delhi’s Make-in-India initiative and the dangers of chasing the China-plus-one opportunity.

Four years ago, Prime Minister Narendra Modi launched a 240 billion rupees ($2.7 billion) incentive scheme to build a solar module manufacturing ecosystem in India. It was part of a wider initiative to reduce his country's dependence on Chinese imports. As a result, domestic cell production capacity nearly tripled to 25 gigawatts during the year to the end of March, and exports surged.

India's success is now a problem, however. The U.S. International Trade Commission last month accepted a petition by the Alliance for American Solar Manufacturing and Trade to investigate whether shipments of solar photovoltaic cells from India, Indonesia and Laos are hurting U.S.-based manufacturers. An earlier complaint by the industry body, which counts First Solar FSLR.O and South Korea's Hanwha Group-backed Qcells as members, resulted in the United States applying duties of up to 3521% on Southeast Asian solar exports. Those went into effect in April. The latest petition alleges 43 India-based companies have benefited from domestic subsidies and earn "dumping margins" of up to 214%. That indicates the likely upper limit for how high any punitive tariffs might go.

India's exports to the U.S. rose as other countries got locked out of the world's largest economy. But India's own goods are also uncompetitive against Chinese products coming into the South Asian country, which remains a top importer of Chinese solar cells. This problem will ease once an official mandate on local sourcing kicks in next year.

Indian exporters may now seek out other overseas markets, but their best hope is to find more local customers. Currently, India's manufacturing capacity for solar panels exceeds its domestic demand. New Delhi is using subsidies to push farmers to adopt solar power, and a boom in energy-intensive data centres may also result in higher orders.

Yet some Indian companies are also setting up production in the United States: Waaree began making modules in Texas in January, and Vikram Solar VIKO.NS is evaluating similar plans. That is a logical outcome to the current mess. But it is also far removed from the manufacturing dream India set out to achieve.

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CONTEXT NEWS

The U.S. International Trade Commission voted on August 29 to proceed with an investigation into whether solar cells imported from India, Laos and Indonesia are stifling domestic manufacturing.

The trade authority acted on a petition brought in July by industry group Alliance for American Solar Manufacturing and Trade, which accused companies from the three countries of violating trade laws and sought the imposition of anti-dumping and countervailing duties on them.