02 Nov 2019

RCEP Risks Wiping Out India's Solar PV Industry

02 Nov 2019  by  PB Jayakumar   

As solar tariffs are crashing and new project auctions have not many takers, solar module and cell makers in India are finding the going tough. If India becomes a signatory to the Regional Comprehensive Economic Partnership (RCEP), the Indian PV industry will get wiped out, fears industry.

While India is trying to add 20-25 GW every year to reach the solar target of 100 Gigawatt (GW) by 2022 and another long term goal of 450 GW in the distant future, the local module and cell manufacturing industry has not been able to create adequate capacities due to viability issues. No new big capacities came up in the past 5-6 years and the size of the domestic photo voltaic and cell manufacturing is only 9 GW and 3 GW respectively. Still India imports about 85 percent of the solar PV and cell requirements, said sources.

The Indian solar PV and cell manufacturing industry has about 100 companies and these include module makers like Waaree Energy, Tata Solar, MoserBaer, Indo Solar and Vikram Solar. Solar PV cell manufacturers include BHEL, Central Electronics Limited, Indo Solar and Moserbaer. Modules and solar cells imported from China, Taiwan, Vietnam and Malaysia are cheaper by at least 10-20 percent, said sources.

"China offers land almost free, cheap power, manufacturers get subsidy and numerous export incentives. They also have the economies of scale as they have created huge capacities", said Amit Gupta, director, Vikram Solar.

As against this, land is not cheap, power is not subsidised and the 20-25 percent capital subsidy offered takes years to get. Debt available to the industry is at very high interest rates and by the time capital subsidies are released, the subsidy advantage is neutralised by the high interest costs already paid. In the case of solar EPC, GST has to be paid for 70 percent of the project cost at 5 percent and for the remaining 30 percent, 18 percent GST have to be paid, effectively paying an average 8.9 percent GST.
India should not compromise on ensuring safeguard duty for the Indian PV industry,  they say.

Another issue is demand is coming down for new projects. In the National Thermal Power Corporation (NTPC)'s recent tender for 1200 MW, 300 MW was won by TBEA, a Chinese manufacturer of power transformers and other electrical equipment by offering a tariff rate of Rs 2.63 per Kilowatthour (kWh). The only other bidder was a solar inverter maker SB Energy, which quoted a tariff of Rs.2.65 per kWh. In September, NTPC had issued a tender to set up 1.2 GW of the interstate transmission system (ISTS)-connected solar projects. Response was tepid and bids were received for only 600 MW. TBEA and SB energy bid for 300 MW of solar projects each.

While new bids have no takers, many states demand up and running projects to revise the power purchase agreements (PPA)s. "The market is volatile and investors are very cautious and for those executing projects, margins have come down drastically", said Amit Gupta. He says India should urgently come up with a proper solar policy to allay the concerns of the PV makers to keep the momentum of adding new capacities have to continue and should incentivise domestic PV manufacturing industry.


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