“The Safeguard Duty Notification issued by The Ministry of Finance does not provide exemption to the projects which have already been auctioned out (approximately 20-25 GW ). This will completely derail the solar industry. To add on to that, the notification does not provide any relief to solar cells and modules manufactured in SEZ and cleared to DTA. Currently, 40 per cent of solar module manufacturing units and 60 per cent of the solar cells manufacturing units are located in SEZs.
In light of the SEZ issue, the notification defeats the very purpose of Safeguard Duty, which is to protect and promote domestic industry. While it may seem logical that SEZs should be exempted, considering that the whole purpose of applying Safeguard duty is to protect domestic industry against imports so why should they pay these duties, unfortunately the policy makers seem to be in dilemma.
A recent report by Parliamentary Standing Committee indicated that in recent years solar imports have led to massive job losses. If SEZ units are not exempted from SGD, it will lead to further job losses and harm the manufacturing ecosystem in India, which is already bleeding. Special Economic Zones (SEZs) enjoy certain benefits, primarily to promote exports but also to cater to the Domestic Tariff Area (DTA). If the safeguard duty is applied without exemption as per the notification, the domestic manufacturers in the SEZ will also be liable to pay Safeguard Duty whenever they sell modules in India. This is because SEZs are considered to be outside the Indian Customs Territory and this would, therefore, be counterproductive for the domestic industry. This move will, in fact jeopardise Honorable Prime Minister’s Solar Mission targets.
We strongly recommend that:
- Government should exempt SEZ to DTA clearance of solar cells and modules
- Government should exempt Projects which have already been auctioned out from the ambit of duties of Safeguard.
It should also be noted that it has been a year since GST was implemented and developers and EPC contractors are still not able to pass on the additional cost of GST to end consumer due to regulatory and administrative bottlenecks. Therefore, it will be very difficult to pass on the cost to end consumer under change in law clause.”
Note:
In a subsequent development, announced on August 2, 2018, Vikram Solar Ltd filed a Writ Petition in Orissa High Court seeking the relief stated below:
- Suitable exemption/clarification for SEZs from duties of Safeguard, which will put SEZs at par with manufacturing units located in DTA.
- Considering SEZ units as a part of Domestic Industry (DI) for the purpose of Safeguard Investigation
- EPC Contracts which are already awarded should be kept out of the ambit of Safeguard Duty
