Current Scenario of Indian Solar Industry and What Should be The Focus Area for Government in 2020

2019 brought India new opportunities for the industry. However, we have to highlight that the country was only capable of installing less than 7 GW of solar energy capacity in the calendar year 2019, which is lower than the country’s performance in the previous year. The trade war between China and the US, inconsistent policy implementation, liquidity crisis, effects of demonetization, PPA renegotiations, GST, slowing down investment, a slew of tender cancellations and dampening global manufacturing pace have interrupted the solar power growth in the country.

Such a scenario has led to a decline in Rooftop installations, increasing payment delays and risk in solar project development, issues in land acquisition and imposition tariff caps surfaced as formidable issues.

The Scenario

It was a challenging year for the industry as the budget for FY 19-20 failed to focus on making soft loans, export credits available or show positive inclination towards making solar manufacturing sector competitive. Lack of favourable solar manufacturing policy, continued imports of solar, inequality in GST on solar equipment, 25% safeguard duty made domestic solar module production expensive and even after the duty dropping to 20%, imported modules were still cheaper, introduction of manufacturing linked solar tenders, forcibly keeping solar bidding tariff down, lack of R&D and performance testing facilities in India, issues in implementing BIS certification, lack of availability of export incentive mechanism are few of the challenges that the industry and domestic manufactures had to face during 2019.

Among EPC sector issues such as lack of geotechnical support in engineering, lack of acquisition, supply management issues, lack of net metering implementation, delays in subsidy disbursal, poor energy evacuation infrastructure are few of the issues that hindered solar project development growth in India as well.

As it seems, 2019 was not quite a progressive year for the solar sector in India. However, with new investment promise by SoftBank, Foxconn Technology etc, Government of India’s focus on rooftop solar, and the country showing demand for higher efficiency modules, 2020 is expected to unleash solar industry’s potential in India.

Identifying The Focus Areas

However, for that to happen, Government of India immediately needs to consider investing in building solar manufacturing as it stands to solve the country’s employment, energy, and economic issues. Additionally, new policies supporting manufacturing, solar export, land acquisition, and simplification of bureaucratic hurdles have to be introduced to support green energy growth in India.

Here are a few areas that need Government focus:

  1. The non-tariff barriers undertaken by MNRE to support domestic manufacturing are:
  • Development of Indian standards
  • Compulsory Inspection of all manufacturing units and allowing only units certified by MNRE to sell in India

However, the process is facing multiple issues like- lack of testing facilities, huge charges (2 million inr for every panel series), 3-6 months period for test completion etc. Government and the industry has to come together to find better solution to simplify these issues and speed up the implementation immediately.

  1. Government is also considering a fund where 10 lakh/MW will be charged from the developers to subsidize the manufacturers in the manufacturing linked tenders. The additional cost will be passed through to the consumer (8p/unit).
  • It needs to be discussed if passing the cost to the consumer is feasible or not and the strategy for the time period till such a fund comes up.
  1. Since MEIS will eventually be phased out (due to WTO Norms), other WTO compliant norms like ROSL (Rebate on State Levies) and R&D incentives should be considered.

A few suggestions:

  • A technology upgradation scheme should be considered for upgrading existing manufacturing facilities
  • Interest Subvention should be at 5%
  • 30% Capital Subsidy should be provided
  • Viable Insurance Products for solar panel performance
  • Power should be supplied at Average Procurement Power Cost (APPC) to Solar PV manufacturing units
  • Solar manufacturing clusters should be established
  • Allotment of land closer to ports at 99 years lease at reasonable costs
  • Merchandise Export from India Scheme (MEIS) Incentives for Solar Modules export should be increased to from existing 4% to 8%
  • Separate 10-digit HS code must be formed for Solar Cells and Modules
  • Budgetary Recommendations:
  • Inverted GST on solar manufacturing needs to be removed
  • Manufacturing in SEZ, DTA and EOU zones should have similar taxation structures
  • Manufacturing units to be exempted from Minimum Alternate Tax

India’s solar manufacturing sector can help the country to solve its employment issues and boost its economy. However, decisions have to be made immediately, and the country is eagerly looking towards the upcoming budget for 2020 to see much required support bestowed.