Make in India: Solar Manufacturers Seeks Level-Playing Field
For Make in India concept to thrive – Government of India needs to relook at the existing policies and create a level playing feild for Solar Manufacturers.
The Indian renewable energy sector is the fourth most attractive1 reneable energy market in the world. India is ranked fourth in wind power, fifth in solar power and fifth in renewable power installed capacity. India ranked second among the emerging economies to lead to transition to clean energy.
Installed renewable power generation capacity has increased at a fast pace over the past few years, posting a CAGR of 17.28 per cent between FY14–19. With the increased support of government and improved economics, the sector has become attractive from investors perspective. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role. As a part of its Paris Agreement commitments, the Government of India has set an ambitious target of achieving 175 GW of renewable energy capacity by 2022. These include 100 GW of solar capacity addition and 60 GW of wind power capacity. Government plans to establish renewable energy capacity of 500 GW by 2030.
As of February 2020, the installed renewable energy capacity is 86.75 GW, of which solar and wind comprises 34.40 GW and 37.66 GW respectively. Biomass and small hydro power constitute 9.80 GW and 4.6 GW, respectively. Off-grid renewable power capacity has also increased. As of February 2020, generation capacities for Waste to Energy, Biomass Gasifiers stood at 139.80 MW and 9,806.31 MW, respectively.
With a potential capacity of 363 gigawatts (GW) and with policies focused on the renewable energy sector, Northern India is expected to become the hub for renewable energy in India.3
Government Policies must be revisited for creating a Level Playing field.
Country’s leading solar photovoltaic (PV) manufacturers, including RenewSys, Vikram Solar and Webel Solar, have extended their support to the Prime Minister Narendra Modi’s recent call for Vocal-for-Local program. However, sought level-playing field for all irrespective of the area within the country.
By welcoming the government’s move, Avinash Hiranandani, Global CEO & Managing Director of RenewSys, which is the country’s first integrated manufacturer of solar PV modules and its key components, encapsulants, back sheets and solar PV cells, said that “the Indian solar industry supports Prime Minister’s vision of an ‘Atmanirbhar Bharath’ and the Vocal for Local campaign to strengthen the Indian economy, hasten recovery, and build a brighter future.”
Hiranandani also believed that “key to the success of these endeavours will be to ensure that India establishes itself as a hub for solar manufacturing post-COVID -19, not just to the booming Indian solar industry, but also to global solar markets. With continued support and encouragement by way of policies and procedures, we see India emerging as a preferred global choice for solar manufacturing.”
The industry players during a joint virtual press briefing considered the government’s initiative as a path-breaking, however, they sought PM’s intervention and the key decision-makers to address certain policy hurdles that solar manufacturers are facing and create a level playing field to all in order to turn this dream into a reality.
The solar manufacturers opined that the Finance Ministry’s proposed move to impose Basic Customs Duty (BCD) on solar manufacturers located within the Special Economic Zones (SEZs) is likely to impact the viability of these units, and hamper India’s ability to produce indigenously manufactured solar cells and modules.
On further explaining the harm to the industry in SEZ, Saibaba Vutukuri, Chief Executive Officer, Vikram Solar, a leading module manufacturer and an EPC & rooftop solar solutions provider, commented that “India is planning to achieve an ambitious target of 100 GW of solar deployment by 2022 as a part of National Solar Mission. It is noteworthy that the 33 GW capacity of solar power deployment so far has been largely attained using imported solar cells and solar panels from China despite India having had enough module manufacturing capacity.”
Vutukuri further added “sadly, this has led to the closure of some of the manufacturing units due to very low capacity utilization. While India has been focusing on creating a market for solar power, now is the time to focus on domestic manufacturing, which would help conserve substantial foreign exchange and create at least 3 to 4 lakh jobs in the next 2-3 years.”
“There is no doubt that India has emerged as a strong market for solar power equipment in the last 5 years. With the Government setting ambitious targets of 175 GW by the year 2022, it is important to ensure a conducive environment in order to achieve it,” said Hiranandani.
Hiranandani also emphasized that “apart from China, Malaysia and other countries, India is also a significant market for solar cells and modules for Indian firms, whether located in SEZ, EOU or DTA. No Custom Tariff was ever envisaged while investing in the manufacturing units in SEZs for clearance to DTA. It is thus important to protect the existing investment, especially in SEZs, by ensuring that in case SEZ units sell their products in DTA/Indian territory, they are liable to pay customs duties at par with the manufacturing units in DTA, and that the customs duty implication on them is limited to an extent of benefits availed in terms of duties and taxes forgone if any, whenever goods are cleared from SEZ to DTA and not beyond.”
Vutukuri, along with Hiranandani and SL Agarwal, Managing Director of Webel Solar, a leading manufacturer of PV monocrystalline solar cells and modules in India, opined that “the imposition of BCD will be detrimental to units located in the SEZs, in case BCD is levied, manufacturing units located to SEZs will get adversely affected as compared to their counterparts in Domestic Tariff Area (DTA) as manufacturing unit located in SEZ which would be liable to pay BCD even on value addition in addition to the BCD on the imported value, whenever they clear goods to DTA.”
On the other hand, a manufacturing unit in DTA would be liable to pay BCD only on imported value of goods and won’t be liable to pay BCD on value addition done in DTA.
Thus the industry players believe that “for module manufacturers located in DTAs, they would be required to pay BCD on the value of the cell, thereby putting them in an advantageous situation as compared to the manufacturers in the SEZs.”
SL Agarwal commented that the government will ensure that the manufacturing units located in DTA and SEZ are placed on a similar footing in terms of customs duties and taxation. This will help India to achieve its renewable energy targets and help the government to achieve Make in India initiative. In addition, the manufacturing units located in SEZ would be able to export as well as cater to the domestic market, hence achieving economies of scale.
With 63 per cent cell manufacturing and 43 per cent module manufacturing capacities located in the SEZs, these solar manufacturers expressed concern that this measure would be counter-productive and harm the very industry for whose protection the measure is intended to be imposed.
Therefore, if the government plans to levy BCD, it must take the necessary steps to protect the investments already made by the manufacturing facilities in SEZs by taking up the matter with concerned ministries to provide exemption ensuring that a unit in DTA and SEZ are placed on a similar footing in terms of customs duties and taxation, they said.
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