PLI scheme to boost solar manufacturing, reduce import dependence

The Union Cabinet’s decision to award ‘performance linked incentive’ (PLI) to solar panel manufacturers is likely to give a boost to the domestic companies. The sector is still nascent in India and the government wants to reduce import dependence.

Adani Green, Azure Power, Kolkata-based Vikram Solar, Mumbai-based Waaree Solar are leading solar panel manufacturers in India. Goldman Sachs-promoted renewable project developer ReNew Power recently announced its entry in the solar manufacturing space.

“Large imports of solar photovoltaic (PV) panels pose risks in supply-chain resilience and have strategic security challenges considering the electronic (hackable) nature of the value chain. A focused PLI scheme for solar PV modules will incentivize domestic and global players to build large-scale solar PV capacity in India and help India leapfrog in capturing the global value chains for solar PV manufacturing,” said the Cabinet decision on the scheme.

The Cabinet approved Rs 4,500 crore for ‘High Efficiency Solar PV Modules’ to the nodal ministry of new and renewable energy (MNRE).

India has set an ambitious target of 175 GW of renewable energy capacity by 2022. This includes 100 GW from solar and 60 GW from wind energy.

While the wind power sector has a strong domestic supply chain, solar power projects are majorly dependent on imported solar panels. Close to 75 per cent of India’s solar power capacity is built on Chinese solar cells and modules. India’s solar cell (component of a solar panel) manufacturing capacity stands at 3 GW and of module (finished product) is 5 GW, while the country’s solar power generation capacity stands at 32 GW.

India awarded its first solar manufacturing tender earlier this year. Under this, Adani Green and Azure Power will construct solar cells and module manufacturing of 2 GW and 1 GW respectively.

MNRE in a recent notification said for any procurement by the Central government agencies and nodal departments, the preference would be given to local products for which there is sufficient local capacity.

As part of the country's recent efforts to ban imports from China, the MNRE has also proposed 20 per cent Basic Customs Duty (BCD) on imports of solar cells and modules. At the same time the Directorate General of Trade Remedies (DGTR) in a recent order extended the safeguard duty of 15 per cent on solar imports coming from China for one more year.