Domestic PV modules: How can Indian manufacturers compete with Chinese manufacturers?
Presently the Indian solar manufacturing industry is in evolving phase which requires handholding to sustain in the market. For the better development of any country growth in Solar PV manufacturing sector there should be proper policies for the encouragement to manufacturers like subsidies should be given on capital cost of land and infrastructure, low interest on project finance, Tax and duty rationalization on balance of systems, promoting R&D activities, providing exim benefits etc.
China PV module manufacturing market was non-existent five year back, however currently this represent about fifty percent of global market share in PV module manufacturing with a total installed capacity of 18.3 GW per year production capacity.The growth of Chinese module manufacturing capacity is mainly due to favorable policy support offered by its government.
China has achieved this milestone through extensive policies like giving subsidy on capital cost of land and infrastructure,
financial support with longer loan re-payment schedules, low interest rate of 0-5%, providing capital for faster up gradation, promoting R&D activities, providing power at cheaper rates, providing tax and duty rationalization on balance of systems, Exim benefits buyers and creating other favorable conditions.
Where as in India the Central and State level policies while delivering demand side incentives, has failed to translate into coherent, consistent supply side policies, for most of the Indian solar equipment manufacturers. The policies provided in India were not attractive as there is no subsidy on capital cost of land and infrastructure, interest rate is very high around 13 – 15%, cost of power is also high, tax and duty rationalization on balance of systems is high, no support for promoting R&D activities for developing new technology. As the policy background in India has not created the manufacturers attractive towards solar manufacturing sector there is poor development of Solar PV manufacturing sector in India.
The impact of changing economic scenarios has created demand-supply imbalance with several Indian manufacturers operating at a sub-optimal capacity or having shut down their production facilities. The Indian market which is evolving currently is seen as one of the huge potential markets globally for solar and to that extent a number of players from developed solar markets are making their presence felt here steadily.These global trade practices and developments have resulted in bankruptcies, insolvencies and restructuring of quite a few solar OEMs, manufacturers and supply chain entities.
Comparison of Indian and Chinese policies regarding Solar PV Manufacturing
|Capital cost of Land Infrastructure||Government allotted or at subsidized rates||Availability at a competitive price is a constraint|
|Project Finance||0-5% per annum interest loans with long tenures||13-15% interest loans, comparatively shorter loan durations|
|R&D||Matured at commercial scale and is vested in the hands of large industries||Lack of industry participation in the R&D initiatives of the government|
|Up gradation||Fast up gradation due to availability of capital||Slow up gradation due to non-availability of capital|
|Exim Benefits||Available with buyer’s credit finance mechanism||None|
|Logistic System||Well established and low transportation costs||Poor infrastructure for both domestic & export markets|
|Cost of Power||Available at cheaper rates||Availability at higher rates|
|Tax and Duty rationalization||Low Tax and duty on BoS and Bill of material of PV modules||High Tax and duty on BoS and Bill of material of PV modules|
Comparison of cumulative addition of manufacturing capacity of PV modules in China and India
So for making India as global solar hub there should be supportive policies from Government towards manufacturers. The recent Ficci report (Securing the Supply Chain for Solar in India) says India can become global solar market if Government provides the following policies to manufacturers:
- Government should extend additional budgetary support through better Feed in Tariff (FIT) and other incentives for domestically procured systems.
- Government should support and encourageinternational companies setting up of facilities in the country with long term plans to invest in India.
- Central government to recommend to state governments and the State Energy Regulatory Commissions (SERCs) where the solar manufacturing industry including Poly-silicon-Ingots and wafer plants are coming up, for special arrangements for lower tariffs (at about Rs. 4 – 6.00 / kWh) for an initial period of 5 years of start of the manufacturing.
- Exim benefit should be given with buyers credit finance mechanism.
- Government should take right policy framework, so as this scenario can change thereby establishing a robust Indian solar manufacturing sector and re-capitalizing the current players.
- Majority local, tax set-offs should be available.
- Up gradation of technology should be present.
- By having strong and ongoing R&D where there will be focused effort on research and development initiated at various institutes like the IITs along with involvement from the industry ensuring minimum overlaps so as to utilize limited resources effectively.
- By promoting cluster R&D for cells in solar PV value chain facilitating near-term commercial applications.
- Having manufacturing and performance standards for the solar industry as a necessity and the relevant government bodies including BIS and MNRE have to take the lead in developing the same.
- Demand-side policy measures such as price preference or DCR combined with price support mechanisms or subsidy from the government are also likely to be construed as specific to the domestic industry and discriminating against imports, running the risk of challenges under the World Trade Organization (WTO).
- There should be support of Capex for solar manufacturing by introducing policies to encouraging production of raw material for the solar PV.
- Schemes for low interest rates and long term loans should be introduced.
- Encouragement for integrated plants in solar hubs, as they are self sufficient should be adopted.
- The government should take initiative for considering lower power tariffs for this green energy sector at par with the global competition (Rs. 0.9 to 1.1 / kWh) for this strategically significant emerging sector which will help in making it cost competitive.
Along with all the above measures the Indian Government should rationalize taxes and duties on the solar photovoltaic value chain and any way the government has taken inverted duty structure for the solar photovoltaic sector which is a matter of grave concern so as to have sustainability in solar sector making Indian solar manufacturing industry competitive with other countries manufacturers and to bring down cost of solar power.