Solar equipment manufacturing: More clarity is needed on the agenda – The Financial Express

Clipped from: https://www.financialexpress.com/industry/solar-equipment-manufacturing-more-clarity-is-needed-on-the-agenda/2270748/

Despite govt measures, the salience of solar imports may persist in near term, say experts, stressing the need for incentives for the MSME sub-sector

Things have not been helped by the discrepancy between the manufacturing capacity proposed to be set up by the Rs 4,500-crore PLI scheme and the annual requirement of modules in the country.

Even as the government seeks to raise the solar equipment manufacturing capacity in the country through the Atmanirbhar Bharat plan, performance-linked incentive (PLI) scheme, and imposition of high customs duty from April next year, the industry is in a state of flux due to the second Covid-19 wave and uncertainty over the recent policy changes. There is lack of clarity over the nine-month period between July 31, 2021, when the safeguard duty regime comes to an end, and April 1, 2022, when the Basic Customs Duty (BCD) takes effect. This has made manufacturers and EPC contractors hesitant to go ahead with expansion of capacity and place orders for modules, respectively.

Things have not been helped by the discrepancy between the manufacturing capacity proposed to be set up by the Rs 4,500-crore PLI scheme and the annual requirement of modules in the country. Vikram V, sector head, and AVP of Corporate Ratings at ICRA says that at the base PLI rate of Rs 2.25 per watt power, the PLI outlay of Rs 4,500 crore can support manufacturing and sale of around 21 GW of solar PV modules over a five-year period, translating into 4 GW per annum, at the base module efficiency and considering full backward integration of the proposed units. However, “this remains lower than the expected annual solar PV demand of 8-10 GW in India. Thus, the dependence on imported solar PV modules may continue in the near to medium term,” he says.

The recent policy changes have also not addressed the dichotomy of India seeking to boost manufacturing capacity and curb imports even as it remains overly dependent on China for raw materials to manufacture solar panels. In any case, given China’s large-scale integrated operations, and cost and technological advantages, domestic solar module players will continue to face stiff competition from imports. Puneet Goyal, co-founder, SunAlpha, a solar EPC player that buys panels from both domestic manufacturers and China, says Chinese panels would remain around 5% cheaper than Indian modules despite the PLI scheme. As against the current landed price of Rs 20-22 per watt peak for Chinese panels, the Indian panels would cost in the range of Rs 22-23 per watt peak. “Indian manufacturers will become more competitive if there is free trade between India and China, with direct benefits being provided to manufacturers in the form of grants, capital subsidies, power costs, etc.,” he says.

Further, lack of clarity on the transition period between July 31, 2021 and April 1, 2022 has made companies uncertain about placing orders for modules, Goyal adds. It is expected that the end of the safeguard duty regime on July 31 this year will lead to dumping of panels in the country, since the cost advantage enjoyed by imports would go up further.

Another issue facing the sector pertains to MSMEs. While the PLI scheme offers benefits to plants above 1 GW capacity in the brownfield and greenfield segments, the large number of 250-500 MW module manufacturing plants, in addition to large ingot-to-cell or wafer-to-cell manufacturers, have been left out of its ambit. Experts believe that since MSMEs constitute the backbone of India’s economy, the PLI scheme should also incentivise MSMEs producing modules and cells. More so, as the pandemic has posed a serious challenge to the future of such units. Hitesh Doshi, chairman and managing director of the Waaree Group, says there is need for policies that make a difference at the grassroots level. “If reforms are not implemented, it will lead to large-scale shutdown of equipment manufacturing units, putting at stake 300,000 jobs,” he says.

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