DOMESTIC SOLAR EQUIPMENT MAKERS LEFT TO FEND FOR THEMSELVES
THE Indian National Solar Mission (NSM) was established with an objective to achieve significant solar deployment while assuming a global leadership role in solar manufacturing across the complete value chain of leading edge solar technologies. After 8 years of NSM implementation, there is no doubt that India has not only achieved its initial solar deployment targets but has significantly revised them upwards. However, it is increasingly being realised that India’s solar story is built primarily on imports as 85-90% of the solar panels are currently being imported into India to achieve deployment targets. Renewable energy (RE) now contributes roughly 10% of India’s energy mix with approximately 27.4 GW solar installed capacity being operational.
CHALLENGES IN THE PATH TO SOLARISATION
Today India ranks 2nd most attractive global market for solar power equipment, 3rd in terms of energy generation capacity and 6th in terms of RE installations but surprisingly it does not have a market for its domestically manufactured solar products. India has approximately 9 GW of solar module manufacturing capacity and 3 GW of solar sell manufacturing capacity, a large proportion of which is lying idle because of lack of domestic demand. The obvious reason behind this is the cheaper imports from China. It has also being realised that with falling tariffs and falling solar equipment prices in the international market primarily China, Indian focus has been shifted to lower tariffs and cheaper equipment than promoting manufacturing, quality and R&D.
Implementation of Domestic Content Required (DCR) projects to provide secure market to the indigenous manufacturers by the government faced criticism from the international community and could not last long. India had to scrap the same to comply with WTO’s order. Thereafter no significant policy decisions were implemented by the Indian government to boost manufacturing or create market for domestically manufactured panels. The Indian solar equipment manufacturers are left to fend for themselves.
It is pertinent to note that the competitiveness of any manufacturing industry is a function of inputs cost such as interest, cost of electricity and raw material. In India, interest rate are significantly higher and do not have a value chain ecosystem for solar manufacturing, as a result thereof most of the raw materials are imported resulting in higher logistic and raw material cost with associated foreign exchange risks. Indian manufacturers cannot be expected to compete with their Chinese counterparts as they have 5-6 times higher operational capacities on an average and have negligible logistic procurement cost as entire value chain ecosystem is built in the vicinity. On the top of it, they are also availing governmental support by way of manufacturing subsidies.
Protectionist policy instruments such as Safeguard Duty and Anti-Dumping Duty are very short-term solution to provide and are considered insufficient tools to create market for domestic products. India needs to learn from China in terms of building robust manufacturing base by incentivising them. The government should initiate multiple steps to develop Indian manufacturing base for solar equipment and create long term market visibility for domestic equipment.
PROTECTING DOMESTIC MANUFACTURING IS IMPORTANT
India has become a big global market for solar equipment and it is the high time for India to promote its own domestic manufacturing industry to attain self-sustainability in solar manufacturing as well. This can be done to incentivise end-to-end manufacturing, providing power to solar manufacturing at its Average Power Procurement Cost of approx. Rs. 3.47/- and not at normal rates besides other incentives and subsidies required to make manufacturing an attractive option.
Solar Manufacturing Industry is technology intensive and require consistent innovation and R&D, there is an immediate need to invest in technologies with higher efficiencies. Incentives may be provided to existing manufacturers to upgrade the technology through Technology Upgradation Fund (TUF) and dedicated government grants.
India needs to immediately implement various schemes like CPSUs, manufacturing policy, enforce public procurement orders for solar procurements, invoke trade remedies for heavy imports and/or dumping. Enough incentives and support should be provided to domestic manufacturers to ramp up their existing capacities and backward integration.
There are apprehensions that promoting manufacturing and schemes mandating procurement of domestic equipment for solar installation may significantly increase solar deployment cost. It is pertinent to note that although incentivising manufacturing has some short-term costs but the long term benefits are immense such as job creation, contribution to GDP, reduced dependence on international market/imports.
India is well on its track to achieve solar deployment targets by 2022. However, the question we need to ask ourselves is — do we want to achieve these targets based on imported equipment or indigenously manufactured products?
If we really want to achieve significant part of these targets through indigenous manufacturing then immediate actions are required to promote solar manufacturing in India. It is imperative that unless bold policy initiatives are taken by the government on immediate basis, the survival of existing manufacturers will be difficult and the circumstances will ultimately force Indian manufacturers to shut their shops.