On the 8th of April, the cabinet approved the production-linked incentive
(PLI) scheme, with an outlay of INR 4500 crore, for solar modules
. This scheme will incentivize domestic and foreign manufacturers to build gigawatt scale, vertically integrated manufacturing facilities
in the country.
The central government in the month of March 2021 introduced a scheme, where it wants to offer companies, incentives on incremental sales from products produced in domestic units. The main motto behind this was to boost domestic manufacturing and cut down on import bills. This scheme also encourages local enterprises to set up or expand existing manufacturing units, apart from inviting foreign firms to establish shops in the country.
“The objective is really to make India more compliant with our WTO (World Trade Organization) commitments and also make it non-discriminatory and neutral concerning domestic sales and exports,” said Rajat Kathuria, Director and Chief Executive of policy think-tank Indian Council for Research on International Economic Relations (ICRIER).
While the Solar PV manufacturers will be selected through a transparent, competitive bidding process, PLI will be disbursed for five years after commissioning of solar PV manufacturing plants, on sale of high-efficiency solar PV modules.
The PLI amount is anticipated to increase with module efficiency and local value addition since the manufacturers will be awarded for higher efficiencies of solar PV modules and also for sourcing their material from the domestic market.
What the government has planned to accomplish through this scheme is to achieve a 10 GW capacity of integrated solar PV manufacturing plants in the country and this is anticipated to drive a direct investment of around INR 17,200 crore in solar PV manufacturing projects, apparently, a figure which the department expects the program to attract from solar manufacturers.The scheme is anticipated to generate a demand of INR 17500 crore ‘balance of materials.’
Solar project installation in India is presently highly dependent upon imported solar PV cells and modules as domestic manufacturers have limited operational capacities. The PLI scheme is aimed at reducing import dependence in a strategic sector like electricity.
Impetus to the Indian solar manufacturers
The solar players have lauded the cabinet’s decision to approve the scheme. Module manufacturer Waaree Group chairman and managing director Hitesh Doshi said, “The PLI scheme would give impetus to the Indian solar manufacturers to increase their production capacities, which, in turn, would stimulate economic and sector-wide growth”.
“Solar sector is highly dependent on imports, which poses risks in supply-chain resilience. The PLI scheme will help India become self-sufficient and self-reliant. And while it puts the spotlight on domestic manufacturers, it will also make the country a key global supplier. By diverting demand to India, the domestic manufacturers will get the much-needed confidence to invest in expanding capacity. It will make the sector more operational and accessible to foreign players and enable solar manufacturers to help the government achieve its clean energy targets,” he added.
However, Doshi also stated that additional investment is required to create an ecosystem that encompasses the complete demand-supply chain.
Vikram Solar’s managing director Gyanesh Chaudhary stated, “The move to approve the PLI scheme reiterates the government’s intent supported with policy actions to enable an ‘Aatmanirbhar Bharat’.
Self-sustaining ecosystem for solar equipment manufacturing
With an outlay of INR 4500 crore for higher-efficiency solar PV modules, the PLI scheme is anticipated to not only bolster domestic manufacturing and job creation but also attract investments and reduce solar imports. India is strongly positioned to become the manufacturing hub for renewable energy technologies, with this decisive step towards creating a self-sustaining ecosystem for solar equipment manufacturing in India.
Solar developer Avaada Group chairman Vineet Mittal termed the PLI scheme as a huge boost for domestic players engaged in producing PV modules. “The budget outlay will certainly provide a fresh boost to R&D that will ultimately help in adding solar capacity more cost-effectively. This step has the potential to reduce dependence on imported PVs and make the solar energy sector truly Atmanirbhar,” he said.
The PLI schemes were first announced in 2020 with an aim to create global manufacturing champions in the country by eliminating sectoral bottlenecks and developing economies of scale to build complete ecosystems for components. This February, the government invited global firms to take advantage of the INR 1,97 trillion worth of PLI schemes for 13 sectors and expand their manufacturing in India.
Galvanizing Power Companies into Action
India is strongly positioned to become the manufacturing hub for renewable energy technologies
As the Union Cabinet, chaired by PM Narendra Modi, approved production-linked incentives (PLIs), that have been designed to increase local manufacturing and decrease imports from countries such as China worth INR 4500 crore for solar PV modules, Tata Power Solar Systems Ltd has doubled its solar cell and module manufacturing at its facility in Bengaluru to 1.1 gigawatts (GW).
The company has expanded its manufacturing capacity of cells from 300 MW to 530 MW with Mono PERC and module from 400 MW to 580 MW with Mono PERC Half-cut technology.“The expansion is based on the significant increase in demand that the company has seen for its solar modules, as well as the expected increase in demand due to supportive policy steps announced recently by the Government of India for creating ‘Atmanirbhar Bharat’ (Self-Reliant India),” Tata Power said in a statement on 8th of April, 2021.
By this, we understand that India is looking to play a larger role in global supply chains, by leveraging its growing green energy market to boost manufacturing. At present, the country has a domestic manufacturing capacity of only 3 GW for solar cells and 15 GW for solar modules. Therefore, the PLI scheme for solar PV modules is anticipated to not only add 10000 megawatts of integrated solar PV manufacturing capacity but also get direct investments of about INR 17200 crore and create 30000 direct jobs. Furthermore, the domestic manufacturing plan for solar equipment has gained traction with 15 organizations, on the whole with a total investment of around USD 3 billion to build solar equipment manufacturing facilities, as reported by Mint.
“The expansion comes amid the positive intent of the Government of India towards making this country a manufacturing hub and lessen its dependency on other countries as far as import of solar cells and modules are concerned,” the statement added.
While the solar components market is dominated by Chinese firms, India imported USD 2.16 billion worth of solar photovoltaic cells, panels, and modules in 2018 & 2019.
Achieving the Target of Solar Energy Capacity
The world’s largest clean energy program is being run by the country with an aim to achieve 175 gigawatts (GW) of renewable capacity, including 100GW of solar power by 2022.
As per the Central Electricity Authority, the country’s power requirement would be 817GW, by 2030. This is more than half of which would be clean energy, and 280GW would be from solar energy alone. Therefore, to achieve the target of 280GW, around 25GW of solar energy capacity is required to be installed every year till 2030.