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The Indian Government has made incredible strides to lead the country into green energy transition. From 2010, when India had a meagre 10 MW solar capacity, the leap to 9 GW, has been commended at the global podium. And with favourable growth in solar installations, India’s module manufacturing capacity has grown approximately 150 per cent in just the last two years (from 2014).
Government support has been a key driver behind this growth. The Jawaharlal Nehru National Solar Mission (JNNSM) policy, first introduced the importance of domestic manufacturing within its target parameters. The JNNSM policy also brought along large scale deployment goals and aggressive R&D implementation targets. But a greater push came with the Hon’ble Prime Minister, Shri Narendra Modi’s ramping up of the solar energy targets from 20 GW to 100 GW, by 2022. Increasing the capacity target created demand, making the Indian solar industry a $100 billion investment sector, bringing in investors, and encouraging private players to increase their generation capacity.
Policy Initiatives
Policy initiatives from the Indian Government have been crucial in the recent change we are witnessing in the Indian solar sector. Indian Government’s pursuit of getting Domestic Content Requirement policy implemented is quite commendable. It would have given domestic manufacturers a level playing field to compete with foreign players. Imported modules are still 8-10% cheaper than domestic modules today. So, the obvious way to compete with them would be to have better demand in the market, which DCR could have offered. However, WTO’s misplaced assessment of the policy, proved a logjam. Hopefully, the same can be overcome in time with more encouraging policies for domestic manufacturing.
Policies like Make in India and JNNSM, initiatives like planning to offer $3.1 billion for domestic manufacturing, working on ‘Prayas initiative’ which can create demand for domestic manufacturers, bringing projects from Government departments (railway, electricity, etc.) for domestic manufacturers, creating skill for faster and better manufacturing through National Institute of Solar Energy (NISE), and alike, are helping solar manufacturing in the country. With continuous thrust and support from the government in these areas, the sustainability of the solar manufacturing industry in the country can be firmly established and strengthened.
A new policy is also under development that is expected to roll out subsidy schemes to speed up the infrastructural changes – like creation of industrial parks, special economic zones, and industrial corridors. The new policy is also supposed to offer support for R&D, export, investment, sector/area specific venture preferences, amongst others. Further, corporate tax rate reduction by 25%-30%, increasing the validity period of industrial license, and creation of random inspection scheme, which are expected to arrive with this policy, will definitely simplify business processes.
Challenges
The new manufacturing policy can help India to become the third-largest economy of the world by 2030. However, the policy is at a stage of evaluation by the Inter-ministerial committee. Delays in the arrival of the policy is proving a hurdle for domestic manufacturing capacity enhancement, while slowing down the progress rate for reaching 100 GW by 2022. The faster the new policy is implemented, the more would be the chances of attaining the ambitious target marked by the Government.
Domestic manufacturing is the only way to build self-reliance in the solar energy sector, which was one of the primary ideas behind energy transition. However, lately, solar module dumping by foreign countries (India spent $1.3 billion in 2015-16 in solar module imports), reduced rate of incentives and subsidies, lack of awareness campaigns and R&D improvements in the country, are coming in the way of domestic manufacturing capacity enhancement. Besides concentrating on domestic manufacturing, Indian Government should also revisit the idea of imposing anti-dumping on foreign solar module sellers. Additionally, there is the issue of quality with imported modules, as members of the Indian Solar industry have time and again pointed out that most imported modules cannot sustain solar power generation for the desired time frame (beyond five years).
Why domestic manufacturing is important?
A strong domestic manufacturing eco-system is important to push a nation through socio-economic growth barriers. Domestic manufacturing can make India the third largest economy in the world by improving social, industrial, and economic infrastructure. From creating jobs to reducing import expenses, domestic manufacturing comes with an array of benefits that can boost national uplift.
Indian solar industry has stepped into maturity, but we are still dependent on investors, financiers, and lenders to make solar energy bankable. For a country that is trying to build investor’s confidence in the solar sector, using low-quality solar equipment is potentially a big step back in the shadows.
Addressing the challenges along with provisioning solar tariff stabilization, easy financing, incentivizing large scale operations, offering capital subsidies, export subsidies, regulating and implementing policies are critical factors; if we are to succeed as a solar reliant country and compete with China, US, Japan, Germany and other leading players in the world.
Bibliography:
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