Manufacturing solar programs: Extra readability is required on the agenda – The Monetary Categorical
Even if the government tries to increase the production capacities for solar systems in the country through the Atmanirbhar Bharat plan, the performance-based incentive system (PLI) and the introduction of high tariffs from April next year, the industry is in a state of change towards the second Covid -19 wave and the uncertainty about recent policy changes. There is uncertainty about the nine-month period between July 31, 2021, when the protective tariff regime expires, and April 1, 2022, when the base tariff (BCD) comes into force. As a result, manufacturers and EPC contractors are reluctant to expand their capacities or to order modules.
The discrepancy between the proposed production capacity to be set up under the PLI program of Rs 4,500 billion and the annual demand for modules in the country did not help things. Vikram V, Sector Head and AVP of Corporate Ratings at ICRA says that at a PLI base rate of 2.25 rupees per watt of power, PLI spending of 4.500 billion rupees over the manufacture and sale of around 21 GW solar PV modules can support a period of five years -year period, which corresponds to 4 GW per year, in the case of the base module efficiency and taking into account the full backward integration of the proposed units. “However, this remains below the expected annual PV demand of 8-10 GW in India. The dependence on imported PV modules can therefore persist in the short to medium term, ”he says.
Recent policy changes have also failed to take into account India's dichotomy of trying to increase manufacturing capacity and curb imports, although it remains too dependent on China for raw materials to make solar panels. In any case, given China's large-scale integrated activities, cost and technology advantages, domestic solar module suppliers will continue to face fierce import competition. Puneet Goyal, co-founder of SunAlpha, a solar EPC player that buys modules from both domestic manufacturers and China, says Chinese modules would remain around 5% cheaper than Indian modules despite the PLI program. In contrast to the current land price of 20-22 rupees per watt peak for Chinese panels, the Indian panels would cost in the range of 22-23 rupees per watt peak. "Indian manufacturers become more competitive when there is free trade between India and China, with direct benefits to manufacturers in the form of grants, capital subsidies, electricity costs, etc.," he says.
In addition, the lack of clarity about the transition period between July 31, 2021 and April 1, 2022 has unsettled companies when placing module orders, adds Goyal. The end of the protective tariff regime on July 31 this year is expected to result in plate dumping in the country as the cost advantage of imports would increase further.
Another problem facing the sector concerns MSMEs. While the PLI program offers advantages for systems with a capacity of more than 1 GW in the brownfield and greenfield segments, the large number of 250-500 MW module production systems in addition to large ingot-to-cell or wafer-to -Cell manufacturers left out of its scope. Since MSMEs are the backbone of the Indian economy, experts believe that the PLI program should also incentivize MSMEs to manufacture modules and cells. All the more so as the pandemic has posed a serious challenge to the future of such units. Hitesh Doshi, Chairman and Managing Director of Waaree Group, says it needs policies that make a difference at the grassroots level. "If reforms are not implemented, it will lead to large-scale closures of equipment manufacturing facilities and 300,000 jobs at risk," he says.
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