Policy Changes amid COVID-19 Crisis Spells Support to the Solar Industry

COVID-19 hasn’t just caused a loss of life and untold suffering to the world, it has also brought economic damage on a scale that is suspected to surpass damage caused by 2008’s global financial crisis, globally as well as for India. Understanding the situation and its impact on our future, the world is moving towards protecting the promising business sectors and manufacturing industries. Considering the socio-economic opportunities that come with one of the most promising and lucrative industries such as Solar, India has also moved forward with policy initiatives to support solar growth.

The Changes 

Considering the global economic uncertainty and sapped equity market, it is easy to assume that the disinvestment targets are unlikely to be met. Therefore, it is important to have policy actions to reduce economic fallout. Renewable energy sector and especially the solar industry in India is facing a survival challenge due to its heavy dependence on Chinese imports (Chinese suppliers have claimed 90% of Indian industry). This has unravelled the fatal flaw of importing solar rather than enhancing domestic solar manufacturing, we can only hope that the Government of India will bring initiatives to solve this issue. However, it is the present changes in Government policies that we need to be appreciative about as it has given solar industry in India relief from pressure and aided in planning its future.

Supporting Force Majeure 

Manufacturing contraction in China has disrupted the supply chain, which has delayed completion of the solar IPP projects in India. The estimations show that among a cumulative capacity of around 12 GW of solar projects that are expected to be completed by the end of 2020, around 10 GW supply is dependent on China. Traditionally, all solar IPPs contracts, including the PPAs come with penalty clauses that come into effect in case of delay in completion. However, the Government of India has given solar project investors and developers a major relief by announcing to treat delays on account of supply chain disruption due to COVID-19 spread in supplier countries as Force Majeure. Thus giving time extension to the developers and saving them from huge financial losses.

Reducing Repo Rate

Reserve Bank of India has also stepped forward to support the industries and to stave off recession in the country by announcing to reduce the repo rate. On 28th March 2020, Reserve Bank of India (RBI) Governor Shaktikanta Das announced to cut interest rates by 75 basis points to 4.4%. This initiative also involved permitting all lending institutions to allow a 3-month moratorium on payment of instalments on term loans. This initiative coming after India’s finance minister Nirmala Sitharaman releasing a ₹1.7 lakh crore package to combat the impact of the coronavirus lockdown, will be injecting ₹3.74 lakh crore liquidity into the system. With other industries, this initiative has helped the Indian solar industry by maintaining liquidity to handle necessary operations and plan for the future.

Extension of the ALMM Deadline 

The Government of India has also extended the implementation date of Approved Lists of Models & Manufacturers (ALMM) for solar PV modules and solar PV cells from March 31 to September 30, 2020, due to COVID-19 pandemic. Thus bringing simplicity and omitting delays within the process until the industry is able to stand on its feet.

O&M of RE plants: Essential Services

Highlighting that power generation (including renewable power generation) is an essential service for maintaining the flow of electricity across and within states during the COVID-19 crisis, MNRE has requested states to allow movement of material and engineers to ensure continuous renewable power generation. Clarification of O&M for RE plants was a decisive step taken by the Government of India to stand by its efforts to promote and nurture renewable energy growth and transition within the country, even during the crisis.

Appeals to the Government

The situation clearly speaks of the importance of building a solar manufacturing scale in India and highlights the impact of green energy industry centralization in a foreign country. As a domestic solar manufacturer and an industry leader, we would like to recommend the Government to bring in policy stability to make changes happen.

Input Costs

  • 5% Interest Subvention on term loan and working capital
  • Supply of power with high reliability at Average Power Procurement Cost (APPC) rates, currently it is around INR 3.50/kWh

Financial Incentives

  • Upfront Central Financial Assistance of 25-30%
  • Increase export incentive from 2% to 8% under RoDTEP

Fair Trade Regime

  • Tariff barrier like BCD/SGD/ADD for at least 4-5 years while ensuring that SEZs are treated at par with DTA in terms of levying of duties of customs.

Support to Existing Manufacturing Facilities

  • Technology Upgradation Fund for existing investments in cell and modules.
  • Reserve 25% of domestic procurement for high-efficiency/new technologies with 10% higher tariffs.
  • Allow stage-wise backward and forward integration in Manufacturing Linked Tender
  • Capital subsidy of 50% for setting up R&D and Quality testing infrastructure within the manufacturing unit

We should all appreciate to the Government for incorporating incredible changes that have supported and have shown a path to the future to the solar industry. However, we need to acknowledge that country wide green energy adoption is the best path for economic recovery which we desperately need. Therefore, more aggressive changes to incorporate green energy transition is expected from India.