The finance ministry has rejected an ambitious Rs 20,000-crore plan to prop up local solar equipment manufacturers with incentives and subsidies to help them withstand the flood of Chinese imports, said a source close to the development.
The domestic industry is concerned about rising imports of solar equipment, which rose 38 per cent to Rs 21,400 crore in 2016-17, accounting for 90 per cent of the solar cells and modules used by Indian solar developers.
The ministry for new and renewable energy (MNRE) began working on the policy soon after an appellate body of the World Trade Organisation (WTO) upheld a complaint made by the US against the ‘domestic content requirement’ component in India’s Jawaharlal Nehru National Solar Mission in September last year.
The solar mission had a provision by which a part of India’s solar capacity target had to be met using locally made solar panels and modules, which the US maintained contravened three separate WTO agreements to which India was a signatory.
The September decision was the third time the WTO had upheld the US view, with India having appealed the earlier two decisions in appropriate forums. The renewable energy ministry thus began looking for other ways to support domestic manufacturing, which would be consistent with WTO requirements.
That such a policy was in the offing was confirmed by energy minister Piyush Goyal at a media briefing following a Cabinet Committee on Economic Affairs (CCEA) meeting in Februray this year.
The plan, intended to help Indian solar manufacturers’ lower their costs through various subsidies and thereby enable their products to match global prices, would have cost the exchequer Rs 20,000 crore, said the source cited earlier.
The MNRE did not provide any answers when asked about the progress in drafting the proposed policy. Instead, a senior official noted that there were already incentives for solar manufacturing under the Modified Special Incentive Package Scheme (M-SIPS).
“Incentives are available for 44 Fe categories of electronic products and product components including solar photovoltaic equipment – polysilicon, ingots and/or wafers, cells, modules and panels,” he said in an emailed reply.
“Units across the value chain starting from raw materials to assembly, testing and packaging of these categories are included.”
The incentives comprise 20-25 per cent subsidy on investment in capital equipment and reimbursement of countervailing or excise duties on such equipment for units outside special economic zones. But M-SIPS is an initiative of the ministry of electronics and IT and has been in operation since 2012.
The proposed solar manufacturing policy was entirely different. Domestic solar manufacturers have sought support because the local industry’s limited size makes it unable to compete on price with imported products, primarily from China.
“Over-reliance on a single country puts the Indian solar sector at a risk of disruption in global supply chain and change in Chinese government policy,” solar consultancy Bridge to India noted in a recent blog.