Even though India’s manufacturing policy recognizes solar manufacturing to be of strategic importance, the sector continues to suffer due to various challenges including lack of a level playing field.
According to a recently released white paper on the solar manufacturing sector in the country by the Indian Solar Manufacturers’ Association in collaboration with KPMG, a holistic policy that encourages domestic solar manufacturing is the need of the hour.
The white paper said the challenges plaguing the domestic solar manufacturing sector had prevented the industry from developing economies of scale and an end to end supply chain.
It is estimated that about 100 GW of solar capacity will be established in the country by 2030.
Promoting a sustainable domestic manufacturing industry, the white paper said, could save $ 42 billion in equipment imports. Also, such a measure would lead to creation of 50,000 direct new jobs and more than 125,000 indirect jobs in the next 5 years, it added.
The white paper stressed that strong presence of domestic solar manufacturing would provide better energy security for the country. The potential supply side disruptions could be prevented if the sector was not dependent on imports, it pointed out.
The report compared the present solar manufacturing industry with the electronics industry in the past and suggested measures that could help avoid some of the mistakes that had been made with regard to the latter.
India currently imports over $ 30 billion of electronic goods annually making it the third largest item in the import basket and accounting for 23 percent of the trade deficit.
The white paper said that such a situation could have been prevented if the electronics industry was supported during the nascent stage. It added that though efforts were being made belatedly by the government to promote domestic electronic manufacturing, import of electronic goods continued to rise.
The white paper noted that critical drivers such as skilled manpower, economies of scale, R&D capability and the entire ecosystem needed sustained government support over a period of time.
“Indian solar manufacturing is competitive but suffers due to lack of incentives that are provided to solar manufacturers in other nations. 40 percent of the Indian solar producers have shut down with the industry utilization at just 21 percent. Countries with ambitious solar energy generation plans such as China, USA and Japan have strongly supported domestic manufacturers through a number of trade and manufacturing incentives to make them even more dominant in the coming years. These measures include loans at reduced interest, credit guarantees, capital subsidies, tax holidays, antidumping measures and preferential domestic procurement amongst others,” said Ashwani Sehgal, President, ISMA.
The white paper said there would be substantial investments by solar equipment producers if solar manufacturing was backed by reliable long term demand on a level playing field. Some global players might also invest in the country with a view to cater to the export market, it added.
Considering that entry barriers for solar capacity creation was low and gestation time for green-field investments only 6-12 months, the white paper said a robust domestic industry would not only offset the higher costs of solar power at present but generate additional revenues through investments and taxes in the long run.
The net benefit to the government owing to promotion of solar manufacturing has been pegged at $ 1.1 billion over the next 10 years through employment and taxes.
“While supporting domestic manufacturing industry could result in moderately higher price of solar power in the short run, the cost curve would fall in the medium term as scale and supply chains develop. The concerns over unavailability of solar panels or sharp price rise can be allayed given that adequate manufacturing capacities exist in countries such as South Korea, Japan, Mexico and Singapore. There is a cost difference of about 5-10 percent between the largest Chinese solar panel supplier and the largest Singaporean solar panel supplier indicating availability of competitively priced imports,” said Santosh Kamath, Head of Renewable Energy, KPMG in India.