The Ministry of New and Renewable Energy in India has recently received proposals for over 10 gigawatts (GW) of new solar equipment manufacturing ventures. This development follows the inauguration of a 750-megawatt (MW) solar project in Rewa, Madhya Pradesh. Both initiatives align with India’s resolution to achieve an installed renewable energy capacity of 175 GW by 2022, which includes 100 GW of solar energy.
Increasing Interest in Domestic Manufacturing
The surge in interest for domestic manufacturing of solar equipment has happened concurrently with the government’s measures to encourage homegrown industry. These include hiking duties on imported goods across a range of sectors, solar power included. A proposal is underway to increase customs duty on solar equipment to around 20-25%. Additionally, a 5% interest subvention scheme for domestic manufacturing of ingots, wafers, and cells is being considered. However, such duty alterations need to adhere to World Trade Organisation (WTO) standards.
Solar Power and India’s Position
Since 2014, India has been making substantial progress in solar capacity addition and ranks as the world’s third-largest solar market. However, India’s domestic solar equipment manufacturing industry hasn’t fully capitalized on this potential. Despite the 20GW demand for solar cell manufacturing, India’s current average annual capacity stands at around 3GW.
Dependence on Imports
Approximately 80% of inputs and components for solar equipment are imported from China, which was the top exporter of solar cells and modules to India in the Financial Year 2019-20, contributing USD 1.68 billion worth of products. Consequently, India has imposed safeguard duties on solar equipment imports from China and Malaysia, extended until July 2021 at a rate of approximately 15%. However, these safeguard duties have a limited duration and do not motivate individuals to make long-term investment commitments.
Challenges in Scaling-Up Domestic Production
Despite numerous initiatives to spur domestic production like the safeguard duty, domestic content requirement policy, and an approved list of models and manufacturers, the anticipated ramping-up has fallen short. There are about 16 solar cell manufacturers in India, but only half of them have a manufacturing capacity of 100 MW or more.
Hindrances to Solar Energy Development in India
Solar cell manufacturing entails a complex, technology-driven process that requires substantial capital. Additionally, it evolves every 8-10 months. The global market of solar wafer and ingot manufacturing is primarily led by China, which also dominates the Indian solar components market through competitive pricing.
Measures to Promote Solar Energy Production
Robust financial measures, fostering research and development, and appropriate mechanisms to counteract China’s dumping of solar equipment are necessary to bolster solar energy and its production in India. The government’s move to shift from short-term safeguard duties to the imposition of customs duties has encouraged the industry to make long-term investment commitments, marking early successes in the solar energy space as part of the Atmanirbhar Bharat Abhiyaan initiative.