In a bid to enhance the country’s domestic solar manufacturing capabilities, the union cabinet recently approved the Ministry of New and Renewable Energy’s (MNRE) proposal to implement the production-linked incentive (PLI) scheme for high efficiency solar modules. With an outlay of Rs 45 billion, this National Programme on High Efficiency Solar PV Modules aims to achieve multi-GW-scale manufacturing capacity for high efficiency solar PV modules. This is the latest of the many Make in India measures adopted by the government to reduce solar cell and module imports and make the country’s solar industry more self-reliant.
The domestic solar equipment manufacturing market has failed to keep pace with the rapid solar power capacity deployments in the past few years. India still imports more than three-quarters of its solar equipment, with a significant share coming from China. Thus, the Covid-19 pandemic and the ensuing lockdowns across the globe, including China, restricted imports and led to severe disruptions in India’s solar supply chain. This hit the country’s solar deployment plans until supply normalised, and presented a strong case for the expansion of domestic manufacturing capabilities. Border tensions with China in the Galwan Valley further strengthened the case. Following this, the government has taken a series of steps in the past few months to increase self-reliance and decrease solar imports. For instance, a one-year extension on safeguard duty was announced in July 2020 for all solar cells and modules imported from China, Thailand and Vietnam. Further, a basic customs duty of 25 per cent on solar cell imports and 40 per cent on solar module imports has been imposed with effect from April 1, 2022. The MNRE has also written to various state governments and port authorities to identify land parcels of 50-500 acres for setting up renewable energy equipment manufacturing parks. Reportedly, the Tuticorin Port Trust and the state governments of Madhya Pradesh and Odisha have already expressed interest in setting up such parks. Moreover, the MNRE has set up the Renewable Energy Industry Facilitation and Promotion Board to streamline investments in the sector. In November 2020, the government announced that it would set aside Rs 1.45 trillion for 10 critical sectors, including high efficiency solar PV modules, over the next five years. The PLI scheme for solar modules received government approval on April 7, 2021.
Specifics of the PLI scheme
As part of the PLI scheme, solar PV manufacturers will be selected through a transparent competitive bidding process. The incentives will be disbursed for five years post the commissioning of solar PV manufacturing plants, on sales of high efficiency solar PV modules. Further, manufacturers will be rewarded for higher efficiencies of solar PV modules and for sourcing material from the domestic market. Thus, the PLI amount will increase with increased module efficiency and increased local value addition. The MNRE will come out with detailed guidelines for the implementation of the PLI scheme for manufacturing high efficiency solar PV modules shortly. The MNRE had consulted various industry stakeholders during the preparation of this scheme. Many of India’s leading domestic players had shown their willingness to set up large and vertically integrated solar manufacturing capacities. According to a government announcement, the outcomes or benefits expected from the scheme are as follows:
- Additional 10,000 MW capacity of integrated solar PV manufacturing plants;
- Direct investment of around Rs 172 billion in solar PV manufacturing projects;
- Demand of Rs 175 billion over a period of five years for balance of materials;
- Direct employment of about 30,000 and indirect employment of about 120,000 persons;
- Import substitution of around Rs 175 billion every year;
- Impetus to research and development activities to achieve higher efficiency in solar PV modules.
India’s domestic manufacturing industry has limited operational capacities of solar PV cells and modules. Thus, the PLI scheme aims to reduce import dependence in a strategic sector such as electricity by incentivising manufacturers. By doing this, the scheme will also support the Aatmanirbhar Bharat initiative. Further, with incentives for the domestic procurement of raw material, the scheme will help in improving the entire solar PV ecosystem including the currently absent polysilicon, ingot and wafer markets. Domestic manufacturers such as Vikram Solar, Tata Solar, Adani Solar and Premier Energies have announced capacity expansion plans. Even large IPPs such as ReNew Power and Azure Power have decided to foray into the manufacturing space with massive facilities in the pipeline. Going forward, these initiatives will go a long way in achieving economies of scale and making globally competitive and quality products.