In an interview with EQ Magazine Manish Gupta, Founder & President of NIMMA said, “…if the government doesn’t put a barrier to rumours and come up with the clear notification on basic custom duties, the survival of Indian manufacturers will be very difficult.”
Indian module manufacturers especially from the SME and MSME sector conglomerated in 2017 to form the North India Module Manufacturer Association (NIMMA). Registered in Delhi, this association has become the voice of SME related requirements, raising their issues with the government. To discuss the current solar market in India, Manish Gupta, Founder & President of NIMMA joined EQ in an online interview. Here are the insights:
Issues addressed by NIMMA in the past:
BIS, 2018: Talking about the initiatives and achievements of NIMMA, Gupta mentioned the BIS incident in 2018. He mentioned, “BIS was made compulsory and the companies that didn’t have valid IEC certificates were also supposed to take the BIS, which is a money intensive process. For BIS, one need 25-30 lakhs, each for BIS and IEC from the same lab with almost the same process and at the same price.”
He added, “We presented our case to MNRE (Ministry of New and Renewable Energy). Shri Anand Kumar was secretary at that time, he understood our problems and requirements. Then the MNRE issued a notification that companies with 50 MW manufacturing capacity, if they have a valid IEC, they will be exempted from BIS.”
ALMM: The association also addressed the Approved List of Models and Manufacturers (ALMM) issue at MNRE that resulted in the government issuing a notification reducing the costing for SME and MSME. It happened when ALMM was made compulsory, the initial inspection fees per inspection, per factory and per module or unit was very high.
Safeguard Duty: NIMMA along with two other organizations shared their view on the safeguard duty and the MNRE and Director-General of Trade Remedies’ (DGTR), who applied the duty, reviewed it thoroughly . As a result now this duty was removed.
Problems at present:
Talking about the current issues, he mentioned that the import of solar equipment is free, there is a lack of barriers in the system. He said, “We are strongly opposing this from NIMMA and other associations to ensure timely enforcing the application of the proposed basic custom duty w.e.f. 01-04-2022. Anti-dumping duty or entering duty is to be imposed to discourage free import.”
NIMMA is in regular conversation with the government for the policy related framework, strongly working to strengthen indigenoius manufacturing industries.
While discussing the PLI (production-linked incentive) schemes, he mentioned, “Although we wanted the government to include the SME and MSME sector under the PLI scheme, but that didn’t happen.” He added, “We convinced the government to come up with an incentive scheme for manufacturers so that Indian manufacturers are encouraged for indegenous production and dependence on other countries is reduced.”
Loss to SMEs due to duty-free imports:
The cost of raw material has increased exponentially in the past few months across the globe. Solar industry is no exception to this rise, be it wafers or cells.
When asked about the Bloomberg study stating the cost of raw material might come down, he mentioned that the way the cost of raw material has increased, he does not believe that the old study will be applicable now because of the upping of the cost. Including the steel or chemical industry, the cost of everything has gone up with a major difference in the last six months.
The global pandemic, lockdown following it and subsequent economic slowdown might be cited as the reason. Along with this, the withholding of supply from China across the globe could be partially responsible for the rise in prices. A major reason could be an extreme growth in the sea grid, by around five times, which is why the prices have increased.
He further stated, “Along with the prices of raw material, the availability of raw material is also a cause of concern. Although December onwards the demand starts increasing gradually, so probably in future the situation might get better.”
BOX: KEY CONCERN
“The price of raw material has increased, but the cost of finished products has not increased much. There are many raw materials that have doubled or increased by three times in cost but as a finished product- solar panel’s cost has not increased much.”
– Manish Gupta, Founder & Director of NIMMA
Big Challenges: From October 1, the government has increased the GST from 5 per cent to 12 per cent. Clubbed with GST, the cost at which the end-users get the product has drawn a big difference, and this is why the demand for panels has decreased in the last two months.
Way Forward:
On talking about initiatives by NIMMA, Gupta said, “NIMMA as an organisation cannot contribute to the global pricing trends, but we can request the government to put as many barriers as possible on the imports.”
Gupta expressed his concern and said, “Due to no barriers on imports, Chinese modules are flooding the market. Earlier the share of Chinese imports was 80 per cent, now it has increased to 95 per cent. So, if the government doesn’t put a barrier and the 2022 notification does not mention necessary duties, the survival of Indian manufacturers will be very difficult.”
Alternative Approach: To address this issue, NIMMA recently had conversations with MNRE ,various ministries, including the labour ministry because if the manufacturing units work on less capacity, there will be a loss of jobs. He shared, “Solar manufacturing industry harbours around 2 lakh direct and 10 lakh indirect jobs in India but no industry is working beyond the capacity of 50 per cent right now.”
Government’s take:
The conversation was also joined by Dr. Akhilesh Kumar Jain, Domain Expert & Director Insolation Energy and Former Managing Director, Rajasthan Electronics & Instruments Limited. Expressing his views on the net zero emission by 2070 target at COP26, Jain said, “The commitment of the PM is not just from today but this commitment is from 2014-15. His visionary leadership increased the target from 20 GW to 100 GW, and now he is talking about 450 GW by 2030. As far as his commitment is concerned, it is very strong for the nation and the world. But the implementation of the leader’s commitment requires industry, institutions, state government and related union ministries to work in coordination.”
He added, “The gaps that are coming are due to inconsistent policies. NIMMA emphasised that a period with no safeguard duty will come, and the custom’s duty will be applied and implemented nine months later. This is what the inconsistency is. Honourable PM always desired the issues coming on realising the RE vision to be timely resolved that we are also addressing through NIMMA.”
He claimed, “For example, GST implementation is a good step, but this GST should be also applied across the value chain including at PPA being signed so that the GST is distributed across the value chain.”
BOX: TAKE ON GST
“For example, GST implementation is a good step, but this GST should be also applied at PPA being signed so that the GST is distributed across the value chain.”
– Dr. Akhilesh Kumar Jain, Former MD, Rajasthan Electronics & Instruments Ltd.
Solution:
He claimed, “For the high cost of raw materials, the organisations who have taken and executed the tenders , they have challenges . So, in such situations what they normally do is to go into defer mode. Defer meaning that the speed of execution will slow down. Here, the penetration of the ecosystem is to understand the situation, and accordingly take decisions in dynamic mode.
He added, “If we want 450GW till 2030, we need to increase the annual installation capacity to over 30-35 GW every year. As per our current speed, it is around 10-11 GW. So, it is very important to dynamically handle the situation . Post-pandemic, we are facing issues related to fare, transport costs are high, factories are not running 24*7 in China and other places causing an increase in labour cost… Overall, the cost impact has harmed the already suffering industry.”
Talking about Indian industry, Jain believes that the MSME sector plays a major role in the solar sector in enhancing the reach to rural areas or the common man.
Redressal mechanism:
Directing the conversation towards the employability, he appealed for the immediate intervention of major stakeholders for the current crisis. Jain said, “First, all government contracts, PSU contracts of solar power and the ones under execution require to be reviewed as directed by MNRE instead of slowing them.
Second, the gazette notification related to the announced customs duty needs to be in place , providing the market the clarity on the direction they need to proceed in.”
He concluded, “Ultimately, price, execution, implementation, Make in India, Atmanirbhar Bharat… are governed from the commencement of the contracts. The contracts start from the tendering, which is done by PSUs , Corporates or Government owned such as discoms . The bidders should be clear on the situation in the next two months, six months and a year. The vision is clear in the mind of the Honourable Prime Minister and honorable Minister but when it comes to implementation level, industry level, and a larger perspective for the benefit of the people, I think, there are challenges. They need to be critically dealt with.”
Technological advancements:
There is a lot of research going into the technology sector. The modules manufactured are 350 /400/450W. Indian companies such as INA manufactures modules of 400/450 W, and the factory to manufacture higher wattage is in the pipeline.
Jain said, “ Industry will be manufacturing 550/600/650 W modules, the highest wattage module currently in the world. Innovation and R&D is a consistent process however the basic crystalline technology , currently being used, is the most proven and sustainable across the globe. Solar industry has seen four decades of this technology of implementation. Efficiency in similar technology can be increased by doing Mono, PERC, Bifacial and other methods… but the basic technology remains the same.”
Chinese influence on Indian manufacturers:
Talking about the impact of China on the trends, policies and pricing, Jain mentioned that it is a challenge. He said, “Earlier, it was expected to take 2-3 years, but now things will be better in another few months. However, this will happen once the manufacturers build more trust in the long-term policies. It is believed that the manufacturers will be in position to perform better with the support of the government, policies, developers and other stakeholders.
Dealing with challenges:
Commenting on the challenges faced by the manufacturers, Gupta informed, to achieve the target of 450 GW, the government needs the manufacturing base, land for solar manufacturing.
Manufacturing of solar panels requires more than 20 raw materials. In China, complex systems like development and working, the country has developed a complex system in a 100Km area near Shanghai. This is where most solar panel and raw material manufacturing industry factories are located, which is why their manufacturing system operates on-time.
Further stating, Gupta said, “In India, the major challenge is managing, purchasing and storing of raw materials. Raw materials are made available from China and India. Thus, the lead time of 45-60 days is what we have left. If the government works on this as a regulatory framework, makes parks dedicated for the solar equipment manufacturing in different states, assigns land at one location… (and) panel manufacturers and raw material industries are set up at the same location, it will lead to employment generation and benefit the states. This will also help bring down the pricing in comparison with China.”
PLI Scheme:
Other than the PLI Scheme, no incentive-based facility to borrow loans from banks or governments is available. When looking at the situation practically, under the PLI Scheme the government is not providing any incentive or subsidy for the establishment of panel, cell and wafer industry.
Gupta stated, “The PLI scheme says once you have set up all industries, manufacturing (is done), the government will provide an incentive on the sale. There is no benefit during the manufacturing. Capital and funding has to be managed from the (manufacturer’s) pockets. This becomes a major challenge. Setting up of factories and bigger units in this industry becomes a challenge for the MSME sector, because as a finance or funding, no (subsidy) is provided by the government.”
Conclusion:
As an added suggestion Gupta iterated the example of the pharmaceuticals and textile sector where the loan is granted on interest. If the same happens for this sector the chances of ramping up or advancing the manufacturing increases, one can (prepare) the manufacturing in India in competition with our neighbouring country China.
Gupta said, “To achieve the target of 450 GW, the Indian government requires focus on the entire manufacturing chain and introduction of an incentive based manufacturing base policy for the benefit of the overall sector, not only for the major industries.”
Adding to this, Dr AK Jain added, “As far as the manufacturing is concerned, I think the central government should fix a quota for all the state governments that if they want to do 10 GW in India then they must have manufacturing so that you can offset 2 GW in the state. So, Rajasthan and Gujarat, which are the most promising states followed by Maharashtra, Tamil Nadu, Karnataka, Kerala…
If they are mandated to develop those clusters of manufacturing industries related with cell, module, structure, and storage… Till the time that is done, if the centre asks the state, the state will provide all the help. Land will be provided free of cost, the finance would be provided, some state subsidy will also (be provided). The lead is to have a comprehensive scheme. Second point, the comprehensive scheme should take care of the MSME sector. State and Centre, both should work together. Everybody needs it and the manufacturing supporting policies.”
As the concluding remarks, Gupta said, “India is the second largest market… Today, before 28 July 2021, more than 80 per cent solar panels were imported with the existence of safeguard duty. During the no duty period, 95 per cent solar panel is imported in India.”
He concluded, “Solar power generation and solar power equipment manufacturing are two different business models. Government requires focus on power generation but without manufacturing, how will we generate power? How long will we be dependent on other countries for our requirements?”
