While the government must help increase India’s manufacturing capacity and improve the quality of modules as part of the Make in India initiative, it needs to simultaneously retain the price competitiveness of solar power so as to not increase the tariff that is borne by the end consumer.
India’s endeavour to tap the sun’s potential as a sustainable source of energy is quite recent. The National Solar Mission was launched just seven years back, in 2010, with a target of adding 20 GW by 2022. The Government went ahead full throttle on the mission and made remarkable progress. The year 2015 saw a perceptible revision of the mission’s target – a mighty five-fold jump to 100 GW! For the world’s third-largest economy that sustains 1.3 billion people, the target is both modest and ambitious at the same time. India’s energy consumption has doubled since 2000, even as 240 million people still lack access to electricity. Going ahead, India will be the greatest contributor to the projected rise in global energy demand.
Considering that India’s current installed solar energy capacity is a little over 13 GW, the task at hand may seem formidable. However, in light of the country’s huge progress in the last three years (the installed capacity at the end of 2014-15 was 3743.97 MW), it is not quite so. That is, if we follow a balanced approach to develop the solar energy ecosystem in the country.
India is strategically positioned to achieve this target and needs to maintain the commendable momentum. Only an enabling policy environment can support the country’s solar ambitions. Currently, India’s solar cell manufacturing capacity stands at 1,753 MW and solar PV module manufacturing capacity at 6,913 MW. Nearly 4,000 MW of module manufacturing capacity is entirely dependent on imported solar cells. To achieve the 100 GW target by 2022, India needs around 20 GW of solar module availability per year.
In this backdrop, levy of an Anti-Dumping Duty (ADD) on imports of solar cells and modules from China, Malaysia and Taiwan has the potential to make India’s module manufacturing capacity uncompetitive. While the Government’s policy must certainly help increase the manufacturing capacity in India and improve the quality of the modules as part of the Make in India initiative, it needs to simultaneously retain the price competitiveness of solar power so as to not increase the tariff that is ultimately borne by the end consumer.
Imposition of ADD of 12-15 cents per watt of installation cost will increase solar power tariff by Rs 0.80– Rs 1.30 per unit which will take the tariff to Rs 3.50 to Rs 4.00 per unit. Electricity distribution companies are unlikely to buy solar generated electricity with tariffs over Rs 3 per kWh. At that tariff, India would be able to set up only 30 GW of solar plants by 2022!
The Anti-Dumping Investigation on imported solar cells, therefore, needs serious contemplation in view of the 100 GW target. The price of imported solar modules is comparable with the international price settled at the exchange. For instance, the Custom Import price in Q4 of FY 16-17, was $0.31-0.46/WP, while as per exchange, the price range was 0.31-0.36/WP. World over, the prices of solar cell and modules have been steadily decreasing. Coupled with increased efficiency, it has resulted in tariff reductions. China commands more than 60 per cent of the total solar cell as well as module manufacturing capacity in the world. But this predominance is by virtue of its installed capacity and not by virtue of its lower prices.
A quick glance at the figures in the public domain indicates that the domestic manufacturing industry may not be under threat in the absence of ADD. In fact, the last few years have shown that it has prospered in the absence of ADD. Between 2014 and 2017, the industry grew three times in size, while the capacity utilization of plants increased from 28 per cent to a whopping 78 per cent. Currently, solar power plants using domestic solar cells have been hugely subsidised through Viability Gap Funding (VGF) to enable domestic manufacturers to remain competitive in the local solar power market. A subsidy of around Rs 1.75 crore per MW is offered to keep the tariffs of such solar plants competitive. This, even as solar power plants using domestic solar cells had reduced output in the range of 4-9 per cent, vis-a-vis plants at the same location with imported cells.
The size of the Indian solar power market is directly proportional to the tariffs. ADD may result in shooting up of tariffs and shrinking of the size of the market. In that case, domestic solar cell and module manufacturers stand to suffer the most as their installed manufacturing capacities will remain greatly unutilized. Further, to keep tariffs competitive, the Government will have to cough up more VGF. If at all, the Government needs to consider recommending a minimum import price for import of solar cells and modules as was done for the protection of the steel industry. This will effectively protect the domestic solar parts manufacturing industry while ensuring that it strives to remain competitive and grow on its own efficiencies.
Solar power at a tariff of Rs 2.50 to Rs 2 per unit has the potential to bring huge economic gains to the country. Low cost solar power can make industries such as steel, cement, and aluminium competitive. Low cost of power can also significantly increase private consumption from the current 60 per cent to a higher level that will sustain economic growth of over 7-8 per cent. India’s power generation system needs to almost quadruple in size by 2040 to catch up and keep pace with electricity demand that – boosted by rising incomes and new connections to the grid – increases at almost 5 per cent per year.
It is imperative for the Government to walk a tight rope and balance the interests of the two inter-linked industries, namely, the domestic solar parts manufacturing industry and the solar power generation industry. Both the industries are critical to India achieving the target set out by the National Solar Mission and neither industry can be given a preferential treatment to the detriment of the other.
Imposition of ADD on solar cells and modules may derail India’s commendable growth in the solar sector and the target of 100 GW solar power by 2022 could become a missed opportunity. India is at the cusp of a major transformation and has barely tapped its huge potential for renewable energy. On solar rests India’s future.
DISCLAIMER: The views expressed are solely of the author and ETEnergyworld.com does not necessarily subscribe to it. ETEnergyworld.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.
About Ameeta V Duggal
Ameeta Verma Duggal is the founder partner of DGS Associates, a New Delhi-based law firm that offers legal services to corporates in the areas of trade, solar energy, civil aviation, real estate, telecom, intellectual property rights, litigation and arbitration. Ameeta heads the Trade Laws Practice of the firm, including anti-dumping, safeguards and foreign trade issues.
Source: energy.economictimes.indiatimes
