Domestic solar panel manufacturing industry gets 12-Gw boost from Centre

The domestic solar panel manufacturing industry, which is battling competition from its Chinese counterpart, has seen a ray of hope with the latest announcement by the government. The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved 12 Gw of solar power projects to be set up by Central government-owned companies, and mandated them to source panels locally.

The move is likely to give a boost to the domestic solar manufacturing industry. Indian panel makers have been facing stiff challenge from imported solar cells and modules, coming especially from China. Close to 85 per cent of India’s solar power capacity of 24 Gw is built on imported Chinese panels.

“The move is bound to attract foreign investment in the long run. We foresee players from China and Malaysia setting up manufacturing hubs in India, thus furthering the ‘Make in India’ initiative. Moreover, while there are ample module manufacturers in the country to meet government demands, the proposal will provide an impetus to existing and new players to venture into cell production, therefore creating job opportunities and enhancing the GDP contribution,” said Sunil Rathi, Director of Waaree Energies, a Mumbai-based solar panel maker. Last year, the Centre imposed a safeguard duty on solar imports coming from China and Malaysia for two years — 25 per cent for this year, 20 per cent for six months thereafter, and 15 per cent for the remaining period.

The solar industry calculated that the imposition of duty will lead to escalation of 50-60 paisa in the final solar tariff. This, the project developers said, will lead to tariff revision for several recently bid and under construction projects. The safeguard duty is a pass-through cost, which means the developer can pass it on their final power sale price.

At the same time, the government also announced a tender for setting up a solar manufacturing plant — with an aggregate capacity of 5 Gw linked to solar power projects (for an aggregate capacity of 10 Gw) in India — on a “build own operate” basis, in May 2018.

After several extensions due to lack of interest, the Centre In January this year decided to cancel the lone bid that came for setting up a panel manufacturing unit, along with a solar power plant. The bid came from Azure Power with Waaree Energies. The government will now re-issue the tender.

Another major challenge the proposal faces is the low capacity of Indian players. The current solar cell capacity in India stands at 3 Gw, of which 1.6 Gw is operational.

In modules, the capacity is 9 Gw, of which 6 Gw is operational. Most Indian firms are running at less than half their capacity, due to lack of demand. Most developers in the country prefer Chinese panels given their low cost. Panel prices in China have fallen to 20 cents per kWh. There is a difference of at least 10 cents per unit, between Chinese and Indian panels, show industry calculations. Rathi added that while the proposal is seen providing relief to solar domestic manufacturers for the next four years, any operational benefit from this proposal will be visible only after a year.

“The move fails to provide immediate support to the sector, which is much needed. Due to this, mid-scale players may not be able to sustain the pressure for the next year,” he added.

source@bussiness standard