Chinese companies are using Free Trade Agreement (FTA) loopholes to export solar panels to India. Indian solar panel makers are finding it difficult to compete with the flood of cheaper Chinese imports that are coming through middle-man nations like Vietnam, Malaysia, and Singapore.
In April 2022, New Delhi imposed customs duties of 40 per cent on solar modules and 25 per cent on solar cells in an effort to increase domestic production and decrease Chinese imports, according to a report by the Economic Times.
However, Chinese companies are figuring out ways to get around these high tariffs and keep supplying Indian solar farm developers.
As evidenced by a year-long investigation conducted in August 2023 by US federal authorities, which found that five Chinese solar panel firms had gotten around tariff regulations by running their operations through nations like Cambodia, Malaysia, Thailand, and Vietnam, the Chinese companies have successfully used this strategy in the past to avoid local tariffs.
Direct Chinese exports to India have decreased since tariffs were imposed; however, between April and August 2023, imports of solar panel modules from Vietnam and Malaysia increased dramatically, making up 60 per cent of all imports into India. The bulk of these products are made by Chinese companies.
Indian manufacturers claim that the imports are harming their country's industry because Chinese companies are abusing the free trade agreement to dump their goods.
India's decision to withdraw from the Regional Comprehensive Economic Partnership (RCEP) is worth mentioning. As a result, there is currently no Free Trade Agreement (FTA) between India and China.