Imports of solar products from other countries like Singapore and Taiwan will not attract SGD since they do not exceed 3% individually and 9% collectively of overall solar imports. The duty will not be imposed on the three solar cell and module manufacturers operating in the special economic zone (SEZ) area, namely Adani Green Energy, Vikram Solar and Websol Energy.

Safeguard duty is a temporary relief provided when imports of a product increase unexpectedly and threaten the existence of domestic players of similar products. In 2017, an application was filed by ISMA on behalf of five Indian manufacturers seeking implementation of a SGD to protect the domestic industry. Mundra Solar PV, Indosolar, Jupiter Solar Power, Websol Energy Systems, and Helios Photo Voltaic claimed that, due to surging imports of solar cells and modules, many domestic producers kept their production facilities idle, resulting in heavy losses that are crippling the domestic industry.

In 2015, India committed to the Paris Agreement whereby reduction of CO₂ emissions by 33%–35% from 2005 levels was targeted. In line with the commitment, the country established a target of achieving 100GW of solar power generation by 2022. This commitment pushed up the demand for solar power projects in India. This in turn led to a huge increase in the demand for solar cells and modules within a short period of time, fuelling the surge in imports of this equipment.

As a result of the massive surge in imports at rock-bottom prices, the domestic industry is unable to sell its products despite the demand in the market. The demand has increased from 1,476MW in FY2015 to 10,573MW in FY2018. During the same period the production of the domestic industry increased from 170MW to 842MW. Imports increased at a compound annual growth rate (CAGR) of 97.6% from 1,275MW at the end of FY2015 to 9,833MW at the end of FY2018.

The provision to Section 8B (1) of the Customs Tariff Act, 1975 states that the SGD shall not be imposed on any product originating from a developing country as long as the share of its imports does not exceed 3% of the total imports of that product. As a percentage of total imports of solar products into India, the imports from China and Malaysia individually account more than 3%. As a result, these products would be subjected to a levy of SGD.

With the intention of reducing greenhouse gas emissions, many countries have started focusing on renewable energy installations. In line with the growing demand for renewable energy components, China has massively increased its production capacity. The country more than doubled its production capacity of solar cells from 11.12GW in 2012 to 27.78GW in 2016.

Similarly, the production capacity of solar modules increased from 12.46GW to 35.47GW during the same period. The country has significantly increased exports of these items to other countries. Previously the destinations for these were the European Union (EU) and the US. But after the imposition of trade remedy measures by the EU and the US, there has been a dynamic shift with India witnessing significant imports of Chinese products.

The anti-dumping and countervailing duties in the US with respect to Crystalline Silicon Photovoltaic (CSPV 1) came into effect in December 2012 and those for CSPV 2 in February 2015. In the EU, the remedy measures came into effect in December 2013. The immediate impact of these measures was not visible in the Indian solar PV market because, as per the Jawaharlal Nehru National Solar Mission (JNNSM), which is a key government scheme for promoting solar power, a separate category of domestic content requirements (DCR) was floated. This provided the assurance of a steady demand for the domestic manufacturers.

However, in 2013, the US challenged the DCR category under JNNSM before the World Trade Organization Dispute Settlement Body and it was found that DCR was inconsistent under the rules set up by General Agreement on Tariffs and Trade. Hence, India had to withdraw the DCR category. Following the withdrawal, the industry witnessed a sudden spurt in imports of solar components, mainly driven by China.

With the major solar PV installations driven by imports from China, the SGD will impact the solar tariffs in India. The upcoming bids for solar PV plants are expected to witness higher bid tariffs, which ultimately will impact the target of 100GW of solar PV installations by 2022.