The Power Ministry has directed the state governments to comply with provisions of the ‘Make In India’ initiative under public private participation (PPP) for boosting indigenous manufacturing and procurement of local goods and services.
The response from the Centre comes after some industry associations approached the Central Electricity Authority (CEA) complaining that state power utilities are not following the requisite norms on local procurement of goods and services. CEA is the nodal agency under the Power Ministry for issues concerning the Make in India initiative.
“Recently, the division had received representation(s) from some of the associations (Laghu Udyog Manufacturers Association etc.) mentioning that many of the state utilities are not complying with the provisions of Make in India orders issued by government of India even though the funding for the project(s) is from the Power System Development Fund (PSDF),” Power Ministry said.
To promote local industries and services in the power sector, the ministry said “Fund allocation is subject to the condition that all the provisions of Make in India (MII) orders must be complied with, in all the activities involved in the project(s) from start to completion.”
Simultaneously to reduce import dependence with regard to manufacturing of power and renewable energy equipment and to promote the Aatmanirbhar Bharat initiative, a scheme for setting up manufacturing zones for power and renewable energy equipment has also been proposed.
Three mfg zones planned
The government is planning to set up three manufacturing zones over a period of three years. Assistance will be given to these manufacturing zones for the purpose of setting up of the Common Infrastructure Facilities (CIF) and Common Testing Facilities (CTF). The modalities for deciding on the locations of these manufacturing zones are under discussion with Niti Aayog.
The issue of enhancing the share of local manufacturing is a crucial link in India’s journey to achieve 500 gigawatt (GW) non-fossil fuel capacity by 2030.
Challenges
According to a February 2022 report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research, there is no existing manufacturing capacity in India for the initial stages of the photovoltaic (PV) value chain, namely from polysilicon to wafer.
“For these raw materials, Indian solar manufacturers are still dependent on imports, mainly from China. Prolonged dependence on the imports raises the severity of the associated risks. Shortage of raw materials, a power price hike in China and a surge in international freight charges have inflated module prices in 2021 by more than 25 per cent. This highlights the need for a sustainable, vertically integrated domestic solar manufacturing ecosystem,” it added.
Without large-scale domestic manufacturing of upstream PV value chain products, the risks of logistics and commodity price fluctuations for imports will persist. The Indian PV industry also faces mid-to-long-term challenges of high manufacturing expenses, inadequate Research and Development (R&D) and a shortage of skilled manpower.