Tata Power, Adani Green Energy face rising costs on solar import tariffs

The Indian government will impose a 40% import duty on shipments of solar power modules and a 25% duty on imports of solar cells from April 2022. The move is designed to ensure that Indian manufacturers obtain a higher market share of investments in renewables as the government aims to increase installed capacity five-fold by 2030. In that regard, it is highly consistent with the "Make in India" strategy that has been deployed in other segments of the high technology space, as discussed in Panjiva's research of Feb. 2.

Panjiva's data shows that Indian imports of solar panels, modules and cells declined in 2020 overall, falling 26.3% year over year in the year as a whole. That was due in part to the closure of the economy early in the coronavirus pandemic. More recently, there had been an upturn, with imports in November 2020 and December 2020 up 31.3% and 56.1%, respectively, on a year-over-year basis.

There may also be a geopolitical angle to the aim to increase Indian self-reliance given that China accounted for 81.5% of imports in 2020, up from 78.8% in 2019, including shipments linked to JinkoSolar Holding Co. Ltd. and Trina Solar Co. Ltd. The imposition of tariffs or increased costs of manufacturing in India may end up being added to utility bills. Project developers, including The Tata Power Co. Ltd. and Adani Green Energy Ltd., will likely include the tariffs in their project development costs, which are principally made up of fixed costs in what is effectively a commodity product.

Christopher Rogers is a senior researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.