Make in India: Is it winking or blinking?

Think of the Indian solar industry as a budding fruit: rich, sun-kissed, and very promising with all of its government-backed policies, funding, and initiatives. In this scenario Make in India is a safety net that assures protection and growth. By growth we especially mean in terms of domestic manufacturing capacity – because that’s the only way a country aspiring to be self-reliant on solar can control its own future. So, needless to say, domestic manufacturing is one of the vital components in bringing ‘power for all’ to India. And domestic manufacturing and Make in India are interrelated – each designed to support the other while ultimately serving India’s industrial growth.

The Vikram Solar team.

Make in India pursuing enterprises and corporations like NTPC, the Army, and Railways to select domestic manufacturers for large-scale project development is definitely good news for domestic solar players. But the question remains, ‘Can India reach its ambitious targets with such limited involvement of the Make in India initiative?’ Limited involvement will only result in limited or disproportionate growth of Indian industrial structure, which is currently far from making the Indian solar industry competitive on a global stage. To alleviate this situation, Make in India needs a slight directional shift – nothing too drastic.

Stepping away from imports

vikram-solar_module-manufacturing-2014_6Currently India is committed to becoming a global solar leader in the near future. Yet the country still spends billions of dollars on imported goods and services in this sector. These are at odds with each other. Becoming self-sufficient is the key to the overall growth of a country, and spending a fortune on imports undermines that plan. However, if the country focuses on supporting domestic manufacturers, India could save up to $42 billion in equipment imports by 2030 in the solar industry alone. That is certainly a considerable sum that a growing solar sector could use to create a stable ground before moving upwards.

In contrast, countries like China and the USA are currently dominating the supply chain market. Both countries have aggressive measures to help domestic manufacturers. And a close look at their growth reveals that a strong domestic manufacturing base has served them well in becoming globally competitive. Under the new government, India is showing strong commitment to supporting domestic manufacturers, in order to own and control all parts of the supply chain. However, reducing solar module imports and focusing solely on domestic manufacturers would deliver even better results.

Developing an industrial ecosystem

vikram-solar_module-manufacturing-2014_4Okay, so domestic manufacturing is important. But, how should Make in India approach it? A manufacturing sector needs a stable ecosystem to grow and enhance capacities. And capacity enhancement is one of the few major requirements an industrial sector must have to achieve global competitiveness. Multinational companies expanding their manufacturing plans, and the World Bank showing interest in investing $1 billion in the Indian solar industry will certainly foster positive changes. But investment alone cannot work without an efficient policy framework. So, India needs to develop a framework that is more effective than that which already exists to support and leverage these plans. Addressing manufacturing issues concerning transport, infrastructure, labor laws, and power outages, would make these policies powerful growth drivers in India. However, India also needs to focus in bridging the gap between having policies and implementing them aggressively, otherwise these strategies will be diluted in their impact. The key to make India globally competitive in the solar module manufacturing sector is through aligning manufacturing plans with the global technology roadmap. Subsidies alone cannot achieve this result. Government has to invest in establishing R&D institutions, which our country clearly lacks. Longer tenure and low cost finances can also help manufacturers to firmly plant their feet in the ground.

Supporting small and large business in different ways

Industrial India is a collection of diverse business entities with different pursuits, characters, and goals. Therefore, policies developed with a ‘one size fits all’ approach will not be successful. A multi-pronged approach is required to take care of different industries in the way best suited to each of them. For example, the requirements of Micro, Small and Medium Enterprises (MSMEs) in India are different than those of large organisations. For MSMEs, policies should focus on tax provisions for entrepreneurs and labor. Plus, there is a high requirement for managerial skill development to maintain operational integrity at all times. Vikram Solar suggests the following:

  • revising industrial and management training curricula;
  • mandating new additions focused on education about labor laws;
  • marketing and accounting skill building; and
  • revamping financial markets.

These minor changes could seriously help MSMEs get a foothold in the extremely competitive global market. Awareness can play a major role as well: Media platforms can be used to transmit career-oriented education to stoke the entrepreneurial spirit of the country.

As for the large-scale manufacturers, the focus should be on:

  • vikram-solar_module-manufacturing-2014-2addressing physical infrastructure issues;
  • resolving poor connectivity in certain parts of India to ensure that transportation of raw materials is no longer a logistical nightmare that slows business growth;
  • streamlining land acquisition, which is currently another impediment for numerous business sectors; and
  • reducing multiple policies and delays in the legal processes surrounding land acquisition.

Large-scale manufacturers would also benefit from a uniform method of environmental clearance generation and concentration on skills development.

At the end of discussion, it is clear that Make in India has enormous potential in making the energy transition both beneficial and profitable for India. However, a few minor modifications to the policy landscape are required to further speed up solar growth and achieve the national target of 100 GW by 2022.