North India Module Manufacturer Association Champions Domestic Manufacturing

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Looking back at 2019, there is absolutely no doubt today, that it has not been a memorable year for Solar power in India. Generators or manufacturers. With a closing installation figure of barely 7 GW as tracked by us, almost every hope from 2018 has been belied. The bad part? Some of the biggest obstacles that came up during the year were not even anticipated. Worse, some of the biggest obstacles to growth were known for a while now, and solutions are possible, but for some strange reason, ability has failed to meet intent to solve these problems. We spoke to people across the sector, from developers, to manufacturers, both Indian and Chinese, to EPC players and more. After all the queries, we look at the top issues that came up, and possible resolutions to these in 2020. For make no mistake, the world continues to have high hopes from India in 2020, with some estimates pegging India’s expected capacity addition at 15 GW in 2020. It’s a number that would make sense if one goes by our own Power, New and Renewable Energy Minister, R.K. Singh’s assertions in parliament.

Speaking in the Lok Sabha on November 28, Singh said this about solar power. “By October 31, this year, a total grid connected solar power generation capacity of 31,696 MW has been set up in the country, projects of 17998 MW capacity are at various stages of installations and tenders for 36278 MW capacity projects have been issued. With new tenders of around 15000 MW planned in remaining period of 2019-20 and 2020-21”. While this assertion was meant to show the path to 100GW, the target for 2022 end, Singh would do well to consider the issues the industry has thrown up, which would need to be resolved to get anywhere close to the number. So let’s dive right in.

When India imposed a safeguard duty on July 30, 2018 for 2 years, the plan was simple. The duty was pegged at 25 percent for the first year, 20 percent for the next 6 months, and 15 percent for the last 6-month period. The idea behind the duty? Provide a level playing field to Indian manufacturers versus Chinese imports. This followed representations to the government from Indian manufacturers, variously estimated to have a manufacturing capacity for 3GW, when it comes to modules that will meet key quality norms.

The duty faced stiff resistance from developers who had counted on Chinese imports to meet their own low bids for projects won earlier, and even for projects going ahead. The Safeguard Duty is now at the fag end of its 2 year cycle, down to the last 15 percent from February next year. What is the impact it had?

On manufacturing, almost none. Not only did the duty fail to stimulate domestic manufacturing, it has barely moved the needle on even domestic expansion by existing manufacturers. Thus, not only has it failed its primary objective, the Safeguard Duty had a chilling effect on procurement, throwing up legal challenges from developers who had not provisioned The for it when bidding, or for orders already placed, and more, leading to a slew of delays in commissioning of projects. In fact, the SGD, along with other policy contortions led to a strange outcome we experienced firsthand as a publication focused on the sector. A demand to ramp up our coverage of legal implications of various government moves. The story of smaller module manufacturers and their own issues with the duty is just one example.

According to Sudhir Aggarwal, Executive Director of Patanjali Renewable Energy “India’s move to impose safeguard duty on import of solar cells and modules last year hasn’t helped domestic manufacturers much. While import of solar cells and modules from China have declined since the duty was implemented in July 2018, India still imported USD 1.9 billion worth of panels in the 11 months ended June 30.”

According to the North India Module Manufacturer Association (NIMMA), an industry association for primarily SME solar module manufacturers in Domestic Tariff Area, around 20 percent of solar modules supply was met by domestic manufacturers and this can be best opportunity to encourage domestic manufacturing. Unfortunately though, government actions have not followed words as the SME sector has been discriminated against, according to them. Thus, while over 90 percent of all SME’s involved in module manufacturing are located in the DTA (Domestic Tariff Area), almost all the large manufacturers are located in SEZ’s.

NIMMA’s contention is that despite the imposition of safeguard duty last year, actual benefits & tax incentives have been given only to SEZ Units on the raw materials, components, consumables and services on all inputs, giving them a clear advantage over SME’s in the DTA for selling in the domestic market. This is one reason why despite being much more labour intensive and matching large manufacturers on quality, the share of SME’s in solar modules is barely 10 percent of domestic market share. Or barely 2 percent of the total national market for modules, according to NIMMA.

NIMMA office bearers contended that SEZ’s, which are meant to be export oriented, are taking advantage of government conditions on domestic outsourcing to steal an unfair march on SME manufacturers, an issue where the government, despite agreeing in principle with NIMMA’s demands in 2018, has yet to take action almost two years after it was raised.

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