India vs China: The Solar Battle
India has imposed a lot of tariffs on Chinese imports - especially in the solar power sector. Will this move come back to haunt us? Read on.
India aims to achieve a target of 100GW in its solar power capacity. In fact, in the 2000s, its solar module manufacturing capacity was larger than China, the current world leader.
But, the present situation is pretty grim. We are far off from the targets that we set for ourselves.
So, in an aggressive attempt to boost capital inflow in solar power, the government has a game plan. What is it?
Make imports costlier by imposing customs duty (40% on solar photo-voltaic modules and 25% on solar photo-voltaic cells) on finished goods so that local people get an incentive to enter the industry and voila! Target achieved. Moreover, this duty will be imposed from April 2022, which will give sufficient time to people to set up the facilities.
Sounds like a plan. Well thought and water-tight. Except, there are some loopholes.
Approx. 75% of India’s solar power capacity is built on Chinese solar cells and modules. And, it turns out that even the raw materials required to set up solar plants are dependent on imports from China. And, manufacturing these raw materials is not as easy as it seems. The technology is highly sophisticated, capital intensive and it keeps evolving.
Now, do you think China will sit quietly if we tell them that we are going to reduce purchases of the final goods from you because we want to beat you? Knowing the power they command, they might retaliate by imposing export duties to crush our solar ambitions completely.
This creates a dangerous situation for India. What if the local facility does not develop as anticipated? It will cut a hole in the pockets of the consumer and the government’s ambitions of becoming a solar ‘power’ will fail. And who will really suffer?
The environment.
Indian government really wants tech innovation to take place. But, it’s just wishing that things will fall into place if they change the rules of the game.
It is time to take a leaf out of China’s book of growth. If you want to beat your competitors, learn from them, maybe?
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