It will increase the current annual solar manufacturing capacity, which stands at around 10GW. It will also reduce India’s dependence on China for solar equipment. Currently, around 90% of India’s solar module needs are met by imports, around 85% of these from a single country – China.
In an effort to promote domestic manufacturing, the government recently extended the safeguard duty on solar equipment by a year. It is also looking to impose basic customs duty (BCD) although it is unclear as to when it will be imposed. As a consequence of these initiatives, many companies, both manufacturers and developers have expressed interest to set up new manufacturing capacity.
The BTI report, however, felt such dependence on government policy for growth was ill advised. “Almost all companies seem to be making opportunistic short-term bets based on government incentives and trade barriers rather than plotting a long-term roadmap to develop business competitiveness,” BTI’s report said.
The report noted that “government incentives alone cannot be a sufficient basis for investment decisions of private investors or developing manufacturing into an engine of long-term economic growth.”
“How will India start controlling a significant portion of the value chain? BCD alone will not be enough. You have to demonstrate that you have demand certainty. If someone sets up a 5GW plant and can’t run it, then what’s the point,” said an industry executive, requesting anonymity.
The executive noted that solar manufacturing has not taken off in India so far because the industry was focused on a very narrow portion of the value chain — that of solar module assembling. There are very few cell manufacturers in the country.
“There is a huge gulf between Indian manufacturing businesses and their Chinese competitors on technology, scale, in-house business capability and external ecosystem,” the report said.
The executive said that building manufacturing capacity now is a tall order because the government has been focused only on bringing tariffs down. “The government came out with the concept of reverse auction. Now this change in strategy will prompt international developers to look at India very differently. We should have set the rules of engagement on day one which we did not,” the person said.