As part of its ‘local solar manufacturing initiative’, India’s government plans to offer a so-called Central Financial Assistance (CFA) in the form of up to 30% capital subsidies to set up/upgrade domestic solar manufacturing capacity - from silicon to modules. For every 1 GW of the different production steps in the value chain MNRE envisages capital expenditures of a certain amount, for example, for silicon this is 10 billion INR ($157.9 million). (photo credit: Mercom India)
- India has come out with a concept note detailing its plans to support expansion/upgrades/setting up of new solar manufacturing units
- It proposes direct financial support of more than 110 billion INR ($1.71 billion) and indirect support through concessions
- The proposed policy will cover the entire spectrum of solar manufacturing from polysilicon to modules
- Interested stakeholders have time until December 31, 2017 to comment on the note
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The Ministry of New and Renewable Energy (MNRE) has come out with a plan to support its domestic PV manufacturing industry. In a concept note, it has proposed to extend direct financial support of over 110 billion INR ($1.71 billion) to support manufacturers of solar products in India. A large indirect support by way of concessions is also contemplated.
The ministry wants domestic current manufacturers to expand and upgrade their existing facilities or to set up new manufacturing facilities to enable products manufactured to be competitive with international solar products. It aims to eventually cover the entire spectrum of manufacturing from polysilicon to modules.
MNRE’s proposed support measures for solar are:
- Revive domestic content requirement (DCR) through expansion of central public sector unit (CPSU) scheme. Previously, it had implemented 1 GW of solar under the CPSU scheme. Now, it wants to have an additional 12 GW with a DCR component, offering manufacturers a secure market. It strives to comply with World Trade Organization (WTO) guidelines.
- DCR requirement will be reviewed annually and adjusted to higher quality requirements.
- As of July 31, 2017, India’s manufacturing capacity for cells was 3.1 GW and for solar modules it was 8.8 GW. Yet, due to huge competition from imported goods, actual capacity utilization of was much lower – 1.5 GW for cells and 2.0 to 3.0 GW for modules. Hence, MNRE has proposed that certain components needed for cell and module manufacturing will face DCR as well. It is supposed to help manufacturers gradually go for backward integration in the future. Over a period of five years, the government would look at creating 10 GW of manufacturing capacity at the initial stage in the entire manufacturing chai – from metallurgical-grade silicon to modules.
- Central financial assistance (CFA) in the form of capital subsidy of 30% will be offered to set up/upgrade domestic manufacturing capacity in the India. For every 1 GW of this capacity, MNRE envisages capital expenditures of a certain amount, for example, for silicon the capital expenditure expected is 10 billion INR ($157.9 million).
- Those who do not take capital subsidies of 30%, will be offered low-interest loans of up to 3% from state-owned banks to set up new capacity. Manufacturers of polysilicon, wafer and cells will be eligible for this scheme, which will be operated by the Indian Renewable Energy Development Agency (IREDA). At the beginning of the year, the total capital available for interest subvention during a specific year will be announced. Calls for expression of interest (EOI) from potential manufacturers will take place and the bidders with the lowest subvention rates will be selected.
- Four public sector units (PSU) will be supported to set up 1 GW each of polysilicon to module manufacturing facilities. They will be selected on the basis of the lowest support required from the government. The maximum support will be 30% of the capital cost needed.
- Capital goods required for setting up solar manufacturing facility shall be exempt from customs duties.
- Solar manufacturing units are planned to be eligible setting up solar power plants twice their capacity. Floating solar power plants are also included but not be eligible for capital subsidy or interest subvention.
- Indian states that commit to certain conditions listed in the concept note will be preferred destinations for new manufacturing facilities under the government’s subsidy/low interest loan schemes.
- MNRE will set up a so-called Technology Up-Gradation Fund (TUF) to support technology upgrades of existing units in the entire manufacturing chain. Separate guidelines will be issued at a later date.
Stakeholders comments on this concept note which is available on the MNRE website, can be submitted by December 31, 2017.
Commenting on the note, local consultancy Mercom India calls it a ‘positive development for domestic manufacturers’. However, it warns that careful attention needs to be paid so that component costs do not end up so high that ‘it throttles the extremely cost sensitive project development activity’.
The government had been thinking of such a plan for quite some time now (see Indian PV Manufacturers). Recently, Energy Minister RK Singh announced that his government intends to establish local manufacturing capacity to supply 20 GW (see India 20 GW Tender Roll Out Start In December).
Nevertheless, the new scheme if implemented in its true spirit will help India boost its manufacturing capacity and encourage foreign companies to to set up their plants in India, as has been shared by a number of companies recently, such as integrated solar module manufacturer LONGi from China or German energy company Siemens, which will start manufacturing inverters..