The Budget allocation of Rs 19,500 crore under PLI scheme for domestic solar cells and module manufacturing will bring an additional Rs 30,000-35,000 crore worth of manufacturing to India, and add about 55 GW per year of solar manufacturing capacity.
The PLI scheme allocation in Budget 2022 will bring an additional Rs 30,000-35,000 crore of solar PhotoVoltaic cells and modules manufacturing to India, cutting dependence on Chinese imports, and bringing the nation closer to achieving 2030 renewable energy targets. The fresh addition to the PLI scheme (Production Linked Incentives) will facilitate manufacturing capacity of 40 GW solar modules by companies including Reliance Industries, Adani group, Tata group, and others.
In Budget 2022 this week, Finance Minister Nirmala Sitharaman allocated Rs 19,500 crore in PLI incentives to make solar modules, bringing the total to Rs 24,000 crore, including the earlier Rs 4,500 crore. The domestic manufacturing of solar modules under the PLI scheme alone will fulfill 54.8 GW per year output. This would aid meeting India’s 280 GW power requirement by 2030. A total of 19 companies had submitted and won bids to make solar modules in India under Narendra Modi government’s flagship PLI scheme.
More solar manufacturing capacity for more renewable power generation
The manufacturing companies receive incentives over five years post commissioning of solar module plants. With 54.8 GW per year production of solar modules, broadly 274 GW of power generation in five years will come from this capacity itself, Saurabh Agarwal, Tax Partner, EY India, told Financial Express Online. This, combined with existing capacity and little imports, will comfortably take India to meet its installed solar capacity target of 280 GW, and overall renewable energy target of 450 GW by 2030, he said.
Why PLI?
The earlier allocation of Rs 4,500 crore would facilitate manufacturing capacity of 10 GW of solar modules, entailing direct investment of Rs 12,000 crore. With the additional allocation of Rs 19,500 crore, the quantum of investments and domestic manufacturing capacity envisaged under the PLI scheme would further increase. “India has been importing 70-80 percent of solar cells and modules for quite some time now. Solar cell wafers are being imported from countries like China, Taiwan and South East Asian countries,” Amit Kumar, Partner and Leader – Power and Utilities, Mining, PwC India, told Financial Express Online.
The response from industry to the government’s Rs 4,500 crore PLI allocation for solar manufacturing was huge, including bids from all serious players like Reliance New Energy Solar, L&T, Adani, etc. The Rs 19,500 crore additional allocation in the recently announced budget will help India add another 40 GW end to end manufacturing to the total capacity, he said.
Who will get PLI incentives and how?
The PLI scheme is aimed at reducing import dependence in the strategic sector of solar energy. Under this scheme, solar PV manufacturers are selected through a transparent competitive bidding process, following which the PLI will be disbursed for five years post commissioning of solar PV manufacturing plants, depending on sales of high efficiency solar PV modules. The bids are invited by state-run Indian Renewable Energy Development Agency Ltd (IREDA).
As many as 19 companies had placed bids during the initial phase, including the likes of Reliance, Adani, Tata, Coal India, Larsen & Toubro, ReNew Power, Waaree Energies, Vikram Solar, among others. Since the fund is an additional allocation, the bidding has already been done and the necessary disbursement will happen in the days to come, to the selected companies, Saurabh Agarwal said.
“Since it’s a production-linked incentive, companies manufacturing from stage-I, that is, starting from polysilicon all the way up to modules, will get higher chances of being successful and more incentive as compared to the ones starting from wafers or cells. This is the reason why most players in the first phase including Reliance, are manufacturing from polysilicon stage. Also, the PLI amount will increase with increased module efficiency and increased local value addition,” said Amit Kumar.
According to rating agency ICRA, currently, with the applicable 14.5 per cent duty on import of solar cells and modules, the cost of imported solar modules stands at approximately 24 Euro Cents/ watt peak (Wp) compared to domestic cost of approximately 30 Euro cents/ Wp. This gap is likely to be filled up to an extent, with the imposition of Basic Customs Duty (BCD) structure announced in March 2021 for imported solar cells and modules, whereas the balance gap is likely to be filled up with the extant PLI scheme.
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