Performance-linked incentives fail to excite solar manufacturing firms | Business Standard News

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Domestic manufacturers could end up getting barely 3-5 per cent of the sale value of their solar cells and modules as incentives through this scheme

The Rs 4,500-crore performance-linked incentive (PLI) for solar manufacturing has not met industry expectations. This is because domestic manufacturers could end up getting barely 3-5 per cent of the sale value of their solar cells and modules as incentives through this scheme.

With the Centre claiming record clean energy capacity of 450 Gw by 2030, the scheme aims to support end-to-end indigenous solar power capacity in the country.

“Industry calculations indicate that in terms of capital expenditure, PLI would be in the range of 15-25 per cent. The incentive on capex will come after five years. The incentive on sales is variable as no one knows how much they will sell. For foreign investors, the incentive is further reduced due to Customs duty,” said a senior executive of a leading solar company.

The Union Cabinet, last month, approved the proposal of the ministry of new and renewable energy (MNRE) for ramping up domestic manufacturing of solar photovoltaic (PV) panels under the PLI scheme.

The proposed scheme is likely to create an additional 10,000 Mw capacity of integrated solar PV manufacturing plants in the country.

According to the guidelines issued by the MNRE, manufacturers will be selected through a transparent competitive bidding process. PLI will be disbursed for five years, post the commissioning of manufacturing plants, on sales of high efficiency solar PV modules.

DAM Capital, in a recent note, estimated that the capital required for 1 Gw of cell and module is expected to be Rs 1,500 crore. The scheme could see 8-10 Gw of solar cell and module manufacturing capacity addition in the country.

“Prima facie, based on guidelines, we believe the scheme is highly beneficial to large players with experience. Adani Enterprises and Tata Power, for instance, have 1.1 Gw and 0.4 Gw of solar cell and module manufacturing capacity. We also expect Coal India and BHEL to participate in the auction among listed entities,” said the note. It added that domestic manufacturers would get additional support from basic Customs duty (BCD) on solar imports.

The Centre will impose 40 per cent BCD on imported solar cells and modules from April 2022 in order to support dom­estic solar manufacturing. Close to 85 per cent of India’s solar capacity is built on imp­orted cells and modules, majority of which come from China.

“BCD offers much better incentive to a foreign player to come and manufacture in India, rather than PLI. Under the PLI, the incentive is very less compared to their capex. For large scale manufacturers, neither the PLI scheme nor BCD is beneficial. Established solar component makers are based in special economic zones (SEZs) and the Centre has not offered any BCD exemption to them,” said a senior industry executive.

Leading players such as Adani Solar, Vikram Solar, and Waaree Energy are situated in SEZs, and thereby, come under the duty regime. Manuf­acturing units in SEZs are considered on a par with foreign companies. Hence, Customs duty is imposed on them too. According to industry data, of the 3,100 Mw of cell manufacturing capacity in India, 2,000 Mw is situated in SEZs. In module manufacturing, 3,800 Mw of the 9,000 Mw is inside SEZs.


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