US Slaps Steep Countervailing Duties on Indian Solar Modules

Why in News ?

The United States has imposed preliminary countervailing duties (CVD) of 126% on crystalline silicon photovoltaic (CSPV) cells and modules imported from India, following an investigation into alleged unfair government subsidies. The decision could significantly affect India’s rapidly expanding solar manufacturing sector, which has relied heavily on exports to the US market.

Background & Context

The duties were announced by the United States Department of Commerce after a subsidy probe into Indian solar manufacturers. The investigation also covered imports from Indonesia and Laos, assigning varying duty rates.

Countervailing duties are imposed to offset subsidies provided by exporting countries that allegedly distort fair trade. These measures are distinct from anti-dumping duties and are consistent with global trade rules under the World Trade Organization framework.

The move comes amid rising trade tensions in the clean energy sector, where governments are increasingly promoting domestic manufacturing through subsidies and industrial policies.

The final determination on the duties is expected later this year.

India’s Expanding Solar Manufacturing Capacity

India has significantly scaled up its solar module production capacity:

• Current manufacturing capacity exceeds 140 GW per annum.
• Expected to rise to over 165 GW by March 2027.
• Domestic annual solar installations are projected at only 45–50 GWDC.

This indicates a structural supply-demand imbalance, making exports crucial for sustaining capacity utilisation.

Between 2021 and 2024:

• Over 90% of India’s solar module exports were shipped to the US.
• Solar exports to the US were valued at $792.6 million in 2024, marking sharp growth since 2022.

Thus, the US market has been central to India’s solar export strategy.

Potential Impact on Indian Manufacturers

1. Export Disruption

A 126% duty significantly increases the landed cost of Indian modules in the US, potentially making the market commercially unviable for many exporters.

2. Domestic Pricing Pressure

If export-bound modules are redirected to India:

• Oversupply may intensify.
• Module prices could decline.
• Profit margins of domestic Original Equipment Manufacturers (OEMs) may shrink.

3. Project & Financing Implications

Tariff disruptions may affect:

• Financing structures of solar projects
• Power Purchase Agreement (PPA) timelines
• Tariff assumptions and viability calculations

India’s renewable sector is already facing:

• Slower project award activity
• Delays in PPA signing
• Transmission connectivity constraints

Further disruptions could impact renewable capacity addition targets.

Divergent Industry Responses

Not all manufacturers are equally exposed.

• Some large firms had anticipated US trade tightening and reduced exports in advance.
• For certain players, US exports now account for a negligible share of total output.
• Export volumes to the US are estimated to have declined in 2025 compared to peak levels in 2024.

Thus, impact may vary depending on company-specific export strategies.

Broader Trade and Strategic Context

The investigation reportedly stems from allegations that Chinese manufacturers, facing US tariffs, shifted production to countries such as India, Indonesia, and Laos to retain access to the American market.

In the first half of 2025:

• India, Indonesia, and Laos together accounted for 57% of US solar module imports.

The duties are aimed at protecting US domestic solar manufacturing under broader industrial policy measures.

However, higher import duties may:

• Increase solar project costs in the US
• Slow renewable energy deployment there
• Create supply chain uncertainties in global solar trade

This reflects the growing intersection of climate policy and trade protectionism.

Implications for India’s Energy Transition

India has committed to achieving 500 GW of non-fossil fuel capacity by 2030 and net-zero emissions by 2070.

A strong domestic solar manufacturing ecosystem is essential for:

• Energy security
• Reducing import dependence on China
• Supporting Make in India initiatives

The US duties may compel India to:

1. Diversify Export Markets

Explore opportunities in Europe, Africa, Middle East, and Latin America.

2. Strengthen Domestic Demand

Enhance policy incentives such as Production-Linked Incentive (PLI) schemes and domestic procurement mandates.

3. Encourage Overseas Manufacturing

Shift from exporting products to exporting capital — establishing manufacturing bases abroad to bypass trade barriers.

4. Improve Competitiveness

Invest in technology upgrades, efficiency improvements, and cost reductions.

Significance of the Development

Trade Policy Implications

Highlights increasing use of trade remedies in the renewable energy sector.

Strategic India–US Economic Dimension

Adds complexity to clean energy cooperation between India and the US.

Industrial Policy Test

Challenges India’s ambition to become a global solar manufacturing hub.

Energy Transition Risks

Excess capacity and pricing pressure could destabilise domestic manufacturers.

Global Climate Paradox

Protectionist measures may conflict with global climate cooperation goals.