Solar subsidies likely to end, sops for manufacturing on anvil

The Union government’s plan to subsidise solar power panel manufacturing may come at the expense of solar power generation.
 

The Centre is planning to do away with the subsidy schemes for the solar power sector — from rooftop to central financing assistance in several projects. 

Deliberations over this are in an early stage.  However, the government is moving fast to give direct subsidies to solar panel manufacturing. During his visit to the United Arab Emirates, Piyush Goyal, minister of state for coal, power, mines and new and renewable energy, indicated that as solar tariffs were market-determined now, subsidies were no longer needed for solar programmes.

A person close to the development said in order to help domestic manufacturing and bring down the cost of solar power equipment, the government is designing a subsidy-cum-support programme for solar panel manufacturing. Domestic solar panels have been coming up against inexpensive Chinese imports. Close to 85 per cent of India’s solar power capacity is built on panels made in China.

“The minister said there is every likelihood that the subsidy for solar rooftop would be withdrawn as the prices in the latest bid have come down. Also, viability gap funding given for solar power needs to be relooked as the tariffs are coming down and are market-determined now,” said an industry executive.

In one of the largest tenders for rooftop solar power projects last week, sector majors lined up to bid at historically low rates of tariffs — from Rs 3 to Rs 6.9 per unit. 

Capital expenditure quoted by the companies is in the nominal range of Rs 59,000 per kWp (kilowatt peak) to Rs 79,000 per kWp.

Against the tender of 500 MW, the bidding agency, Solar Energy Corporation of India (SECI), received bids for 602 MW. SECI provides a 30 per cent capital subsidy to the lowest-cost bidder.

"The removal of the subsidy will strengthen competitive bidding in the sector, leading to a faster adoption of technology and a fostering of relations between the government and the sector,” said Sanjeev Aggarwal, managing director and chief executive of Amplus Energy, a leading rooftop solar company.

Some power generators, however, say that programmes such as rooftop projects need subsidies. 

“The low tariffs discovered in some of the projects is because the Centre or the States provide financial support or some sort of subsidy in capital cost. Removing central grants could escalate the tariffs,” said the CEO of a renewable energy company.

Senior officials in the ministry of new and renewable energy (MNRE) said the support programme for domestic solar manufacturing was in a draft stage. While it is expected to be mentioned in the Union Budget 2017, officials said the scheme would be over-arching for global investors and hence would take time to be drafted. “The government is not looking to provide opportunity to the domestic players but also open up the solar panel manufacturing sector for global players. The aim is to amalgamate the Make in India campaign with the promotion of green energy. We would provide for a level playing field and investment environment,” said an MNRE official.

Business Standard had reported that in a bid to promote domestic solar equipment manufacturing and also comply with the global trade norms, the government was looking to refurbish the domestic sourcing scheme under the flagship National Solar Mission (NSM). This would involve boosting manufacturing through subsidy programmes and increasing the procurement of indigenous solar panels by government agencies and public sector utilities (PSUs).