Indian PV Manufacturers

Government Contemplating Direct Subsidy To Protect Domestic Producers, Within WTO Restrictions
01:27 PM (Beijing Time) - 24. May 2016

Key Takeaways

  • Indian MNRE Minister Piyush Goyal says he will support domestic manufacturers
  • The subcontinent has been working on domestic manufacturing policy
  • Consultancy Bridge to India feels the direct incentives will work only for large scale manufacturing investments, not small companies with uncompetitive capacities
  •  Subsidies only short term arrangement; in the long term ease of doing business in India, infrastructure availability and other business policies will set the pace for solar segment, says Bride to India

The Indian government is thinking of providing direct subsidy to domestic solar product manufacturers. Speaking to news website The Quint, Minister for New and Renewable Energy in India, Piyush Goyal hinted at supporting solar manufacturers in ‘entirety’.

The government is apparently working to bring out a manufacturing policy soon. But clean energy consultancy Bridge to India believes the incentives may only be available to new, large-scale manufacturing investments. In a blog post, it said, “Most of the existing manufacturers with small, uncompetitive capacities may not gain any direct benefit from the new policy. The prospects of market consolidation are also slim in our view because of obsolete and fragmented technologies being currently used.”

India had lost a trade case filed by the US at the World Trade Organization (WTO) regarding its domestic content requirement (DCR) in solar project development. Goyal had earlier stated that his government is planning to bring 16 cases against the US as an appeal against the WTO ruling (see Protecting Domestic PV Makers). Earlier this month, there were reports that India is seeking to arrive at a mutually agreeable solution with the US on the matter (see India-US Solar Trade Dispute).

India is pursuing a target of achieving 100 GW of installed solar power capacity by 2022. Its current capacity is over 7 GW (see India’s Installed PV Up By 3.6% In 1 Month). Many big American PV companies have been very active in the Indian solar sector, including SunEdision, First Soalr. While the country wants foreigners to invest and take active part in the growth story, it does want to give preference to its own solar manufacturers. The solar manufacturing capacity in the country currently is 1.2 GW for cells and 5.6 GW for modules (see India PV Manufacturing Capacity).

The Solar Energy Society of India (SESI) believes the adverse WTO ruling can lead to $100 billion loss for the Indian solar industry.

Bridge to India added that financial incentives and assured market demand can play only a limited role in creating a vibrant manufacturing sector. “Long-term prospects for the sector will depend on ease of doing business in India, infrastructure availability and other business policies,” it said.

Domestic content requirements

Nonetheless, the central government made it mandatory for certain government funded power projects to use locally-made equipment and material procured through domestic competitive bidding. According to Indian business daily The Economic Times (ET), the Central Electricity Authority (CEA) has issued a directive in a letter to heads of central and state-owned power generation, transmission and distribution companies. Foreign players can participate in tenders for projects in a joint venture with local players or in consortium, ‘provided they establish an Indian manufacturing facility through a phased manufacturing programme’.

The quoted price will always be in Indian rupee only if international competitive bidding procedure for tendering is to be resorted to, ‘to create a level playing field’.

The report pointed out that Chinese companies are bagging most power equipment and material supply tenders, even in the solar space, but their product quality is a concern – which usually cannot be substantiated as was seen in other markets, but is rather usually spread to protect domestic products.

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