PLI Scheme Could Support 20 GW Module Sales Over 5 Years

India Ratings & Research Sees India’s Production Linked Incentive Scheme Benefiting Sales Of 20 GW Solar Modules Over 5 Years, Yet Not Enough To Meet 280 GW Solar Power Capacity Target By FY30

PLI Scheme Could Support 20 GW Module Sales Over 5 Years

India’s PLI scheme for solar manufacturing is a good call, according to Ind-Ra, but the amount allocation of INR 45 billion is not enough to meet the country’s solar ambitions by FY30. (Photo Credit: pan demin/shutterstock.com)

  • PLI scheme for solar manufacturing is beneficial, but the amount allocated is not enough for India to meet its solar targets, according to Ind-Ra
  • The current scheme can lower the country’s import dependence from 90% on an average now to 64% to 74% till FY30, but not further down in its current form
  • Strict timelines may discourage manufacturers from being ambitious for backward integration
  • Government should also look into and ensure timely disbursements, easing some of the processes while also scaling up the amount if it wants the initiative to help it meet its ambitions

Calling the Government of India’s Production Linked Incentive (PLI) scheme a shot in the arm and a much-required step to tackle import requirements, India Ratings and Research (Ind-Ra) believes the amount of INR 45 billion for the initiative is not enough to bring its import dependence further down on an average till FY30. The scheme has been expected to lower the country’s import dependence to 64% to 74% from an average of 90% now.

In April 2021, the government approved the PLI scheme for solar modules aiming to add 10 GW integrated production capacity with INR 45 billion support which will be bid out (see India Details Production Linked Incentive Scheme For Solar).

According to the ratings agency that’s part of Fitch Ratings, the current amount allocated can benefit the sales of 20 GW from the capacity across the 5-year implementation period while assuming 100% localization of up to 30 GW in case of 65% localization. Its estimates suggest that since the sales of up to 50% of the manufacturing capacity set up by the winning bidder will benefit from the PLI, it will support 4 GW to 6 GW sales annually over 5 years, while facilitating an additional 8 GW to 12 GW annual solar cell and module manufacturing capacity in India, basing the assumption on base PLI rate of INR 2.25 per W and entirely greenfield expansion.

However, to achieve its 280 GW solar power plant capacity by FY30, out of which it claims the country has about 240 GW under pipeline or yet to be implemented, this INR 45 billion is not enough. Analysts argue in its current form, the scheme will benefit only 8% to 13% of this planned requirement, assuming localization to be between 65% and 100%.

Backward integration and manufacturing capacity will be an important criteria for bidders to get selected, however the analysts believe that higher scales and requirement of backward integration will require much larger investments into the sector. It will also go on to increased consolidation in the space, from the current 15-20 players with significant capacities, as manufacturers will benefit from the economies of scale.

Another pitfall of the scheme Ind-Ra points out is on the execution side where winning bidders may choose to restrict the level of backward integration due to strict timelines. The scheme will provide benefits for 5 years from the scheduled date of commissioning so winning bidders would be wary of overcommitting on the level of integration. “Backward integration may take some time, given the already established procurement contracts and supply chains internationally. Also, in case a selected manufacturer fails to meet the promised integration or capacity or minimum module performance after his selection, he will not get any PLI till he overcomes these deficiencies, and/or performance guarantees can also be liquidated by India Renewable Energy Development Agency Limited in the meantime,” explained Ind-Ra.

The agency calls it a good start but points at timely disbursements, ease of processes and scaling up of the scheme amount as key things to look out for over short to medium tenure to see India self-reliant and simultaneously being economically viable to meet its solar ambitions.

About The Author

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

Latest Videos

Loading...
Subscribe To Our Taiyang NewsLetter 
Enter your email to receive our daily solar sector updates.