Reneging on solar module supply contracts to India: A tit-for-tat affair

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Historically, Indian developers have also renegotiated contracts with India’s own local manufacturers. Credit: HHV Technology

The Indian solar industry expressed shock recently when it emerged that multiple Chinese PV manufacturers had been reneging on supply contracts to India, but it seems this strategy may have been a comeuppance for historic behaviour on the part of some Indian developers.

Not only Chinese module manufacturers but even Indian manufacturers told PV Tech that in the past, when equipment prices had dropped, some Indian developers had been more than happy to renege on contracts, asking for a better price, sometimes more than once.

More recently, with equipment prices levelling out or rising for the first time in many quarters, many Chinese manufacturers have been accused of backing out of contracts. However, due to their previous behaviour on contracts, one analyst said he had “no soft spot” for Indian developers on this issue.

Vinay Shetty, managing director of Chinese PV manufacturer Canadian Solar Energy, denied that his company had engaged in such tactics, but speaking in defence of Chinese suppliers in general, he said: “Two years ago, maybe one year ago, when the prices dropped, the customers also negotiated contracts, […] not once but several times.”

Shetty added that during the same period Indian developers had also renegotiated contracts with India’s own local manufacturers.

Ivan Saha, CTO and BU head, solar manufacturing at Indian manufacturer Vikram Solar, confirmed this – adding: “We have also observed this trend and it is not healthy for vibrant market dynamics at large. Indian market is extremely price conscious and it makes it exceedingly hard for manufacturers to ensure adequate quality while achieving ultra low price points.”

Referring back to the more recent reneging seen by Chinese suppliers, Saha noted that it had happened because since 31 June there have been increases in cell and module prices. This was contrary to last year’s changes where there was an almost 20% reduction in prices.

Saha added that due to the ensuing reneging of contracts by certain Chinese suppliers, Vikram Solar, as a local supplier, had received an increase in new enquiries. 

In any case, with the extremely low tariffs being bid for in India of late, any hiccups in in the development process could be costly.

Rahul Munjal, chairman and managing director of Indian developer Hero Future Energies said that two issues have arisen. Firstly, many India-focused firms had made bids based on a certain module price, often obtained verbally from a Chinese supplier, but due to a recent uptake in China’s own downstream market they were unable to honour those prices.

Secondly, a lot of companies had just started, were halfway through, or just at the end of receiving their module imports, when Chinese companies backtracked for the same reason.

Munjal added: “It’s greed when they know they are selling to India at a very low cost and if you have another buyer for the same module at a higher cost you shift your product.”

Asked if Indian developers would struggle, Munjal said that if all the other variables go well they should be ok. These variables, beyond expectations of getting modules at a certain price, include the dollar/rupee and yuan/rupee exchange rates and getting land on time and at a certain price, among others. All the while there is the looming threat of anti-dumping duties coming in.

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