Make in India, announced by Hon’ble Prime Minister, Shri Narendra Modi brought forward an initiative focused towards manufacturing, promising- manufacturing growth, new investment, job creation, and economic revolution for India. The initiative worked as expected- bringing revenue, initiating technological growth and industrial development in solar power sector. New and lucrative sectors like solar energy in India, witnessed this initiative as the white horse that would have led the industry towards success.
Expectations from the Initiative
Countries like China, US have fared well focusing on manufacturing. They have created jobs, facilitated R&D growth, and built capacity in manufacturing raw materials in a value chain by investing in manufacturing. And Make in India was expected to follow that same path through tried and tested strategies. Government of India extended special benefits to potential sectors (like solar energy in India) and established Special Economic Zones (SEZs) to encourage growth through Make in India initiative. In the same breath, we need to highlight that Government of India’s decision to allow 100% Foreign Direct Investment (FDI) under the automatic route for renewable energy generation also made quite an impact.
It was suspected that Make in India will help India set up a strong solar panel installation and manufacturing industry, satisfying domestic demand and earning revenue through claiming the export solar power market, just like China and US have done. And with initiatives like Make in India running at full throttle, India stood a chance to surpass dominating countries in solar power sector like US and eventually China. However, the biggest challenges to make that happen is lack of support from Make in India.
Current Scenario of Make in India
Considering the growth trajectory (5 GW in 2015 to 10 GW in 2016 to ~24 GW in 2018), solar has proven itself as a viable sector to invest in. And Make in India focusing on solar panels sector would have made a positive impact on India’s social, industrial, and economic environment. However, rather than solar panels manufacturing, India spent $3.8 bn in FY 17-18 on solar module import (~$1 bn in FY 18-19), which has limited the progress in manufacturing capacity expansion, leading to a market scenario where foreign suppliers have claimed more than 80% share.
Additionally, imposition of 25% safeguard duty on SEZ based solar panel manufacturers in India stands to limit India’s solar installation growth, while pushing solar manufacturers out of the market by making their product more expensive than before (it was 8-10% expensive before safeguard). Safeguard duty is a complete reverse of what National Solar Mission and Make in India embodied. And since more than half of domestically manufactured solar equipment comes from SEZ based solar manufacturing units, imposing duties on them, seems to damage the solar industry and increase domestically manufactured solar panel price in India and the project cost.
In the same vein, continuous drop in solar tariff, cancelation of projects, and lack of green energy distribution to the grid is scaring away the investors, making it more challenging for Make in India to succeed.
So, as it seems, although Make in India had the potential to unleash potential of lucrative sectors, especially solar energy sector, it had failed to do so due to lack of focus on domestic solar panels manufacturing. However, it is still possible to turn the tables and utilize initiatives like Make in India.
For that to happen-
- SEZ based solar manufacturers need to be exempted from safeguard duties
- New policies focusing on manufacturing solar and improvement on transport, labor laws, taxation, infrastructure to support the growth
- Flexible financing options need to be available
- Investment in R&D and testing facility development required
- Solar import dependency has to be reduced
Solar is world’s energy future and countries like China, the US have already understood that, considering their aggressive move towards building solar panels manufacturing capacity to satisfy national and global demand. So, India needs to make haste in building up its own solar energy manufacturing capacity or hand over national energy future to the hands of foreign suppliers.
Make in India is the perfect platform to launch Indian manufacturing growth trajectory. And with continued focus, India is expected to overtake EU’s renewable expansion by 2022.