Manufacturers to gain from Niti Aayog-coordinated solar power policy push

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India is readying a major solar push to build on recent successes with a brand new policy to aid manufacturing of equipment that’s going to be in great demand if the government’s plans fructify.Backed by Prime Minister Narendra Modi, the Niti Aayog-coordinated policy is expected to go to cabinet shortly. The new framework is almost ready… It is expected to be taken up by the cabinet soon,” a senior government official told ET.The proposed policy aims to create enabling conditions for solar generation capacity and could include off-take guarantees, 100% payment guarantees, an institutional hedging mechanism for foreign currency funds and a stringent offset. The National Clean Energy Fund’s corpus could be used to provide capital subsidies to domestic manufacturers, reeling under financial stress, for technological upgradation. This fund could also be used to for providing hedging support. Viability gap funding could be offered to developers as part of the package.A new bidding framework is being designed in line with the government’s solar plan. The policy is being designed based on the recommendations of a highlevel, inter-ministerial panel that was set up by the department of industrial policy and promotion.
The government is bullish about developing solar capacity but policymakers are concerned that this could lead to a surge in imports and something needs to be done to incubate manufacturing in the country quickly.It is looking at urgently unveiling a new scheme to establish 5,000 MW of solar photo voltaic manufacturing capacity by 2019. More is expected through this new policy.Solar manufacturers in the country largely assemble equipment from components imported from China, making them costlier than rival products from that country and Taiwan. The government’s solar mission offers subsidies to solar developers sourcing components from local manufacturers.This mandatory sourcing from domestic manufacturers faces a challenge at the World Trade Organisation after India lost a case filed by the US on the issue.The government is now keen on devising a policy that would encourage overseas companies to set up manufacturing facilities in the country as part of the Make in India initiative to avoid a confrontation at WTO.


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