Govt plans long-term exemption for green hydrogen projects from its manufacturers shortlist for solar panels – EQ
In Short: The government is considering a long-term exemption for green hydrogen projects from its manufacturers shortlist for solar panels. This move indicates a strategic effort to support and prioritize green hydrogen production, recognizing its importance in the country’s transition to clean energy and sustainable practices.
In Detail : Following the Galwan Valley skirmishes in 2020, the Indian government issued orders to clamp down on participation of Chinese vendors in public procurement. Recently, the Indian procurement portal GeM announced the removal of hundreds of Chinese vendors over the past three years.
The Ministry of New and Renewable Energy (MNRE), a key player in the Indian government’s decarbonisation goals, has proposed an exemption for green hydrogen developers from adhering to its list of authorised manufacturers to enable them to import solar PV modules and wind turbine models from China.
Additionally, in a meeting with green hydrogen developers, MNRE also proposed an exemption on duties and taxes up till 2035 on equipment imports for setting up export-oriented green hydrogen projects, according to the minutes of the meeting on October 19 accessed by The Indian Express through the RTI.
As per the minutes, MNRE noted that a separate meeting shall be convened with the Department of Revenue to discuss the same. During the meeting, developers also sought an exemption from a Ministry of Finance order dated February 8, 2021 that had barred public procurement of equipment from countries sharing land border with India, a move aimed at China.
The MNRE, according to the minutes, has proposed examining the possibility of exempting green hydrogen developers from its list of authorised manufacturers, which will allow them to import solar PV modules and wind turbine models from China in order to make exports of green hydrogen competitive. Currently, MNRE’s Approved List of Models and Manufacturers (ALMM) and Revised List of Models and Manufacturers (RLLM) do not include Chinese manufacturers as a consequence of the ministry’s policy to boost domestic manufacturing of renewable energy equipment.
Importantly, the ALMM adherence requirement has been temporarily kept in abeyance for the current fiscal year in an effort to increase solar capacity as domestic manufacturing of solar PV modules has not kept up with the demand. In other words, solar energy projects commissioned by March 31, 2024 are exempt from the requirement of procuring solar PV modules from approved manufacturers. Green hydrogen developers have sought for a long-term exemption as opposed to the year-long exemption currently in place.
The exemptions will allow companies to import renewable energy equipment at competitive prices and enable central PSUs like Indian Oil Corporation Ltd and NTPC Ltd, which have announced green hydrogen projects, to procure equipment manufactured in China. Together with proposed exemption from duties and taxes on equipment imports for setting up export-oriented green hydrogen projects, which includes renewable energy plants for supplying power, developers could get an edge over exporters in other countries by offering competitive prices for green hydrogen.
“We will do everything in our power to make India be competitive in producing green hydrogen and to achieve the targets set out in the National Green Hydrogen Mission,” said R.K. Singh, Union Minister for New and Renewable Energy, in a press release published a day after the meeting.
The MNRE did not respond to a detailed questionnaire enquiring about the status of exempting green hydrogen developers from ALMM and RLMM. The Department of Revenue also did not respond to an email enquiry regarding the status of exempting equipment imports for green hydrogen projects from duties and taxes.
As per meeting minutes, MNRE told the developers to put forth their request to the Finance Ministry regarding its order, which was issued by the Department of Expenditure (DoE). So far no such request has been received, an official with the department’s Procurement Policy Division told The Indian Express.
The government’s sidelining of Chinese manufacturers comes at a time when energy companies are doubling down on mass producing green hydrogen, for which renewable energy equipment and electrolysers are key. Even as imports of Chinese solar PV modules to India fell by 76 per cent during the first half of 2023 compared to the first half of 2022, they continue to be cheaper than those made in India.
Besides, to meet its green hydrogen targets by 2030, India needs to add an additional renewable energy capacity of 125 gigawatt, nearly three-fourth of its current total capacity of 179 gigawatt. As per industry sources, importing solar PV modules from China will help with supply and in making Indian exports of green hydrogen competitive at the global level.
Moreover, China is a global hub for manufacturing electrolysers. Paris-based International Energy Agency notes that China leads with 40 per cent of global manufacturing capacity for electrolysers. While India plans to install 60 gigawatt of electrolysis capacity to meet its 2030 target of producing 5 million metric tonnes of green hydrogen, the domestic industry is still in nascent stages.
A total of Rs 4,400 crore earmarked for the Production Linked Incentive (PLI) scheme for boosting domestic manufacturing of electrolysers under MNRE’s flagship Strategic Interventions for Green Hydrogen (SIGHT) programme is set to change that, however it could be years before India reaches some degree of self-sufficiency in electrolyser manufacturing capacity. In this context, supply of made in China electrolysers could be key to the green hydrogen ambitions of central PSUs like Indian Oil and NTPC, which currently face restrictions in importing electrolysis machinery from China.
The Finance Ministry’s order, which has been incorporated in DoE’s Manual for Procurement of Goods, bars bidders from supplying finished goods procured directly or indirectly from vendors in countries sharing land border with India if the vendor is not registered with a ‘competent authority’, in this case the Department for Promotion of Industry and Internal Trade (DPIIT).
Notably, DPIIT registration is contingent upon receiving political and security clearances from the Ministry of External Affairs and Ministry of Home Affairs. Under this rule, bidders are only allowed to procure unfinished goods like raw material, components, and sub-assemblies from such vendors without any registration. The rule is applicable to all central government ministries, departments, and central PSUs like Indian Oil and NTPC, representatives of which were present for the MNRE meeting.
While central PSUs may not be able to import electrolysis machinery from China, it has not stopped others from doing so. In FY23, India imported machines and apparatus for electro-plating, electrolysis/electrophoresis worth $45.61 million, a 40 per cent jump from the previous fiscal year. Machines worth $16.83 million were imported from China alone, a 37 per cent share. Imports from Japan and Germany were valued at $13.5 million and $10.78 million respectively. Major Chinese manufacturers of electrolysers like Longi Green Energy Technology, Peric Hydrogen, and Sungrow Power Supply are actively wooing and striking deals with Indian companies, according to Global Hydrogen Hub, an online tracker of hydrogen market developments.
The government’s attempts to reduce dependence on Chinese imports through tariff and non-tariff measures and by restricting participation of Chinese vendors in public procurement stem from both security concerns and the need to boost domestic manufacturing.
Following the Galwan Valley skirmishes in 2020, the Indian government issued orders to clamp down on participation of Chinese vendors in public procurement. Recently, the Indian procurement portal GeM announced the removal of hundreds of Chinese vendors over the past three years.
