Solar manufacturing schemes face hurdles over subsidy, WTO rules

Ministry officials said they have received several representations from several industry bodies and they are being studied

A subsidy scheme for promoting solar power equipment manufacturing is awaiting approval of the finance ministry while another one that offers assured power offtake to manufacturers is embroiled in World Trade Organisation (WTO) regulations.

Officials said a Rs 160 billion capital subsidy was available to domestic and foreign players to set up end-to-end solar power equipment manufacturing in India. Under the M-SIPS scheme, the subsidy is to be disbursed after the setting up of the facility. The industry, however, has sought an upfront subsidy and interest subvention.

“The process of disbursal of the capital subsidy is complex and based on the reimbursement principle. To encourage effective participation, the capital subsidy should be disbursed upfront against a bank guarantee of the same amount,” the Solar Power Developers’ Association has said in a representation to the ministry of new and renewable energy (MNRE).

Ministry officials said they had received several representations from industry bodies and these were being studied. “Every part of the supply chain has expressed its opinion. These are being evaluated. But sanction of the subsidy is in hands of the expenditure department of the finance ministry,” an official said. 

The MNRE launched another scheme last year assuring power offtake to manufacturers setting up facilities via a bidding mechanism. The government has invited industry feedback on the policy. However, recently the WTO raised questions on the bidding process. 

The industry has another set of concerns about the scheme. A power developer said tariff-based bidding would hurt the sector as lower than market prices would not support large-scale manufacturing. “Solar power tariffs have stabilised at rates that make it the cheapest source of energy in the country. Any further price fall will erode returns for the developer as well as the manufacturer. The government should look at awarding projects in feed-in tariff mode,” said a developer. 

The domestic solar manufacturing industry has yet again moved an application seeking safeguard duty on imports, alleging manufacturers in countries such as China, Taiwan and Malaysia have grabbed over 80 per cent of the Indian market. 

Indian solar panel makers have moved the Directorate General of Safeguards for a duty on imports. The DGS has suggested a preliminary duty of 70 per cent. If confirmed, this could raise the cost of solar power to nearly Rs 3 per unit.

India will see 7,670 MW of solar power projects being tendered in the next two months through competitive bidding. Solar power tariffs have been falling constantly and touched a record low of Rs 2.44 per unit last year. It went up slightly in an auction held in Gujarat to the range of Rs 2.65-3.36 per unit. 

POWER POINTS

7,670 MW

Solar power projects set to be tendered in the next 2 months through competitive bidding

Rs 160 billion

Capital subsidy is available to companies to set up end-to-end solar power equipment manufacturing 

in India

• The subsidy is to be disbursed after the setting up of the facility
• But the industry has sought an upfront subsidy
• Solar panel makers have also moved the Directorate General of Safeguards for a duty on imports
• The authority has suggested a 70% preliminary duty