Solar gear makers set to get captive market in Africa

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Govt opens special $2b window for projects in the continent

With domestic manufacturing clause in solar tenders getting unwanted attention from the west, the government is set to make India sourcing compulsory in loan agreements it signs with African countries, providing a captive market to local solar gear makers.

Sources in the renewable energy ministry said that the Indian Exim Bank is set to extend $2 billion loan to a group of African countries to help develop renewable energy projects in the region. As per the the terms of the loan arrangement, entities tapping this line of credit would have to source 75 per cent of their equipment requirement from India. The bank has already raised $1 billion under the programme that will offer loan at very attractive rates, sources added.

“The ministry of external affairs has already agreed to earmark 15-20 per cent of $10 billion line of credit (LoC) approved for Africa for undertaking solar-related projects in the continent. This would create incentives for Indian industry as well as substantially motivate the partner country to join the International Solar Alliance (ISA),” a government note on the subject said.

“Goods and services (including consultancy services) for at least 75 per cent of the value of the contracts covered under these LoCs must be sourced from India,” the note added.

This will come as a huge relief for local manufacturers who have been facing intense competition in the Indian market from cheap supplies from, where companies are liquidating huge inventory pile-ups.

The move is expected to be a win-win for both India and Africa, as it will provide necessary funds to solar project developers in the continent, while allowing expansion of local manufacturing base here to cater to the needs of a new market. This also becomes important, as India’s decision to include domestic manufacturing clause in solar power mission tenders has already been challenged by the United States in the World Trade Organization (WTO). WTO has given a favourable ruling for the US and India has decided to appeal against the decision.

“Once the Exim Bank scheme for Africa takes off, it could give fillip to domestic solar industry and allow India to help in the expansion of ISA. This would also help in increasing penetration of solar power projects across the globe and reduce the carbon footprint,” said Upendra Tripathy, secretary in the ministry of new and renewable energy source.

He added that the ministry would request the ministries of external affairs and finance to extend the scope of Africa LoC programme, by launching similar initiatives for Latin America and other countries in the Asia-Pacific region.

Under the Africa programme, Exim Bank funding would be available to about 50 countries in and around Africa. The credit line would be opened for installation of solar pumps, home lighting systems, mini/micro/nano grids, solar street lighting, solarisation of health centres and other uses. Maximum funding is expected to go to Nigeria, Egypt, Ethiopia and the Democratic Republic of Congo, all of which have robust plans to develop renewable energy capacity.

As per MNRE data, the installed capacity of solar cells and modules in the country is 1,212 mw and 5,620 mw, respectively, as on April 1. The prime manufacturers of solar cells include Indosolar Ltd (200 mw), Moser Baer Solar (250 mw), Tata Power Solar Systems (140 mw) and Websol Energy System (150 mw). The main solar module makers include Moser Baer Solar (230 mw), Tata Power Solar Systems (300 mw), Vikram Solar (500 mw) and Waree Energies (500 mw).

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