By 2022, India hoped to have installed 100 GW of solar power. However, according to the MNRE, we only had 51 GW of solar installed by February 2022. While we haven’t quite reached our target, the solar business as a whole has grown significantly.
In addition, the government has set a more aggressive aim of 280 GW of solar by 2030. While there is a lot of focus on growing installed solar capacity, the procurement, and production of the necessary raw materials to supply the increased demand for solar hardware need equal attention.
Approximately 95% of renewable energy hardware is currently imported from China, either directly or indirectly. China, for example, has a solar wafer production capacity of about 340 GW, compared to India’s 3 GW cell manufacturing capability.
This domestic capacity of 3 GW is mostly used for captive module production and 8 GW for effective solar modules. Due to the high demand for Chinese modules and the competitive pricing of Chinese modules per watt, 80 percent of the 8GW module production capacity remains unutilized.
The Indian government, under the Atmanirbhar Bharat plan, came up with the policy of Approved List of Module Manufacturer (ALMM) Solar Photovoltaic Module order of 2019 to assist the domestic solar manufacturing industry and protect it from Chinese hardware dumping.
The Ministry of Natural Resources and Environment (MNRE) had issued a notification to increase the Basic Customs Duty (BCD) on the import of modules and cells by 40%. In addition, MNRE’s ALMM regulation mandates that all government solar projects employ only panel brands listed in ALMM.
This decree, which was later expanded to include non-government net metering and Open Access projects, was set to take effect on April 1, 2022.
However, due to difficulties faced by solar developers in commissioning active projects and concerns from several industry groups, MNRE has postponed the policy’s implementation until October. Though this brings some comfort to solar entrepreneurs, we still need to find tangible answers to the problem of our solar sector’s over-dependence on imports.
To reduce our reliance on imports, we must prioritize capacity building. The government’s flagship production-linked incentive (PLI) scheme has been allotted 50000 crores in the union budget for 2022 to stimulate the manufacturing of solar modules. It entails incentivizing the hardware manufacturing sector. For manufacturing units, the PLI provides lower land and tax rates, as well as incentives to expand R&D investments.
While ALMM supports domestic producers, given the large demand-supply mismatch, this is not a long-term solution. When there is adequate or greater capacity at home, disincentivizing imports could be a viable option. India currently needs to increase manufacturing capacity not just to meet its own need, but also to establish itself as a strong alternative photovoltaic supplier to the rest of the globe.
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