The Centre’s move to increase its policy focus on domestic manufacturing through “Atmanirbhar Bharat Abhiyan” as well as “Make in India” initiatives augurs well for the domestic solar manufacturing players.
However, there is need for some clarity on customs duty and concessions for the sector, according to ICRA. The Indian solar power sector has been import dependent with respect to procurement of cells, modules and other equipment, given the cost competitiveness of imports compared to domestically manufactured products.
The safeguard duty on cells and modules imports from China and Malaysia, currently at 15 per cent, is about to expire in July 2020.
To support domestic module manufacturers, the Government has formulated schemes wherein the Central Public Sector Undertaking (CPSU) scheme envisages installation of 12 GW solar power capacities by FY23 with a defined sourcing requirement from domestic module manufacturers.
‘Make in India’ initiative
The Ministry of Railways has a plan to meet 10-15 per cent of its energy requirements through solar power over the medium term by setting up about 3 GW of projects on barren land available alongside the railway tracks, as part of the “Make in India” initiative. In addition, there has been a greater thrust on the domestic manufacturing linked orders by the Ministry of New & Renewable Energy (MNRE).
Sabyasachi Majumdar, Group Head & Senior Vice President, ICRA Ltd says, “Business outlook for domestic solar OEMs remains strong over the medium term, given the greater thrust towards domestic manufacturing. This is evident from the schemes already notified such as the CPSU scheme (12 GW), KUSUM scheme (10-25 GW), Railways (2-3 GW) and domestic manufacturing linked orders (12 GW). This itself is likely to result into a favourable order pipeline of about 35-40 GW over the next 3-5-year period, for domestic solar OEM players.”
“Thus, the long-term policy clarity on customs duty trajectory post July 2020 as well as other concessions (either fiscal or financial, if any) is now awaited to promote domestic manufacturing till scale and cost competitiveness improves for domestic OEMs. Also, clarity is required for a pass-through of customs duty impact for the projects already bid out in the last one year which are likely to be executed post July 2020, given that there have been significant delays in implementation of such “change in law” pass-through for the affected IPPs in the past,” says Girishkumar Kadam, Sector Head & Vice President, ICRA.