Cabinet extends manufacturing incentive program to solar modules

The national production-linked incentive scheme introduced to encourage domestic manufacturing will now encompass solar. The PV policy will offer increased rewards for the production of more efficient panels and for Indian content.

April 8, 2021 Uma Gupta

Image: Adam Jones/Flickr

The cabinet has approved an extension of the national production-linked incentive (PLI) scheme to include solar module manufacturing.

With an outlay of INR4500 crore, the policy is intended to incentivize manufacturers, including foreign firms, to build gigawatt scale, vertically integrated production facilities in India.

A cabinet statement about application of the program to solar module production, released yesterday, said manufacturers would be selected for incentives via competitive bidding, with cash to be disbursed in relation to high-efficiency panel sales for five years after the commissioning of manufacturing plants. The statement also said manufacturers would earn higher rewards for more efficient modules and local content but, if companies are required to bid to accept the lowest incentive payment levels, it was unclear how those two factors could be rewarded.

Aim

The government wants to incentivize the development of enough vertically-integrated factory capacity to produce 10 GW of solar panels per year, to generate investment–presumably private–of around INR17,200 crore in solar manufacturing.

The federal government said the scheme is likely to create demand for INR17,500-crore worth of ‘balance of materials’ components for solar systems.

Photovoltaic project installation in India is highly dependent upon imported cells and modules as domestic manufacturers have limited operational capacity.

Industry reaction

Solar manufacturers lauded the cabinet decision to approve extension of the PLI scheme.

Hitesh Doshi, chairman and MD of module company Waaree Group, said the PLI program would give impetus to Indian solar manufacturers to increase production capacity which, in turn, would stimulate sectoral and economic growth.

“[The] solar sector is highly dependent on imports, which poses risks in supply-chain resilience,” said Doshi. “The PLI scheme will help India become self-sufficient and self-reliant. And, while it puts the spotlight on domestic manufacturers, it will also make the country a key global supplier. By diverting demand to India, the domestic manufacturers will get the much-needed confidence to invest in expanding capacity. It will make the sector more operational and accessible to foreign players and enable solar manufacturers to help government achieve its clean energy targets.”

More cash needed

The Waaree chief added, however, additional investment would be required to create an ‘ecosystem’ encompassing the complete demand and supply value chain.

Gyanesh Chaudhary, MD of rival module maker Vikram Solar, said approval of the PLI scheme reiterated the government’s intent to use policy to support an ‘atmanirbhar Bharat’ [self-reliant India]. Chaudhary said the PLI policy would boost domestic manufacturing and job creation, attract investment and reduce solar imports, leaving the nation poised to become a renewable energy manufacturing hub.

Vineet Mittal, chairman of solar developer Avaada Group, described the policy as a huge boost for domestic module manufacturers. “The budget outlay will certainly provide a fresh burst to R&D, that will ultimately help in adding solar capacity more cost-effectively,” he said. “This step has the potential to reduce dependence on imported PV and make the solar energy sector truly atmanirbhar.”

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