India’s Solar Energy project is coming of age, hidden in plain view

3rd April 2021

3rd April 2021

Amidst the global economic turmoil on the back of the coronavirus pandemic, India is standing at a crossroad with two burning goals on its hand—first, the transition towards sustainable energy and second to become self-sufficient.

When the pandemic hit the countries across the world, prime minister Narendra Modi came up with a mission to give an aggressive push to Indian economy and launched the ‘Atmanirbhar Bharat Abhiyan’ by adopting policies that are efficient, competitive, resilient, self-sustaining, and self-generating. One such concerns solar energy equipment manufacturing. 

Now, India is running the world’s largest clean energy programme to achieve 175 gigawatts (GW) of renewable capacity, including 100GW of solar power by 2022. It has already overtaken the US and has become the second largest solar power market in the world (in terms of solar power installations). 

However, the country cannot seem to meet one goal without compromising on the other.

India’s solar industry is heavily dependent on imports from China that makes India’s inroad towards Atmanirbharta challenging. As of 2020, India produced 36 GW of solar energy out of 90 GW of renewables for which it imported nearly 85 percent of solar equipment from China. 

Although, the country’s domestic manufacturing capacity stands at 11 GW for panels and 3 GW for cells, but about 50% of the capacity remain un-utilised due to price and quality concern.

To support its ambitious plan, the Indian government has taken several initiatives to reduce their dependence on China and the initiative essentially reflects a blend of carrot-and-stick approach to induce a desired behaviour.

In the first step to curb imports of solar panels, the Ministry of New and Renewable Energy (MNRE) has imposed 15% duty for solar cells, Earlier it was imposed in July 2020 just for the first six months but later it was extended to July 2021. 

India launched the second spate of stick strategy in the 2021-22 budget, in which the government has decided to impose 40% basic customs duty (BCD) on solar modules and 25% on solar cells from 1 April 2022

The move will not only make imports costlier but also encourage local manufacturing. 

In addition, MNRE has also issued an order, last month, enforcing a list of approved solar photovoltaic (PV) models and module manufacturers for government-supported schemes such as KUSUM or New Roof-top Scheme. 

The order reads, “Only the models and manufacturers included in this list shall be eligible for use in Government/ Government assisted projects/ Projects under Government schemes & Programmes, installed in the country, including Projects set up for sale of electricity to Government under the guidelines issued by Central Government under section 63 of Electricity Act, 2003 and amendment thereof.”

While these can be considered as punishments, in terms of reward, the government in its 2021-22 budget has allocated approximately $620 million to bolster domestic production of high-efficiency solar components, nearly half of the which has gone to two of India’s public sector companies – Solar Energy Corporation of India (SECI) and Indian Renewable Energy Development Agency (IREDA). 

The government also announced a production-linked incentive (PLI) scheme that offers manufacturers in 10 sectors, including those of high-efficiency solar modules, a total benefit of ₹1.97 trillion.

Imposition of these tariff and non-tariff barriers has ultimately created traction to manufacture cells and modules indigenously with the strategy aimed at pushing India’s attempts to become an integral part of global supply chains.

Meanwhile, another question that arises is how successful these measures turned out? The answer is partly.  As though India has recorded a drastic fall in imports- from $3.42 billion in 2018 to $1.7 billion in 2019 and to $1.2 billion in 2020, but the output of solar energy also decreased. 

However, the Indian government also revealed that after they imposed additional duties on imports across sectors, including solar power, the interest in solar equipment manufacturing started to rise and various domestic and foriegn players have begun to enter into the Indian solar market. 

In the renewable energy space companies like TATA, have already expressed interest in setting up local manufacturing of Li-Ion batteries in the country, under Atmanirbhar scheme of government of India. Apart from that,  France’s Total has bought 50 percent stake in one of the solar operations of the Adani group at the cost of $500 million. India’s Adani Green Energy Limited (AGEL) has also won contracts to produce 8 GW solar energy over five years and to set up a solar cell and module manufacturing capacity of 2 GW by 2022 as a part of the contract from the SECI. 

Indeed, Atmanirbhar Bharat Abhiyaan has certainly opened up a huge opportunity for India’s solar ambition.

 

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