 "Govt to benefit $1.1 bn by promoting domestic solar manufacturing")
If the government supports domestic solar equipment manufacturing industry, it could benefit $ 1.1 billion over the next 10 years owing to improved energy security, job creation and huge forex savings, according a white paper published by Indian Solar Manufacturers Association (ISMA) in collaboration with KPMG. The paper highlights that given the strategic need for solar power in India, a holistic policy to encourage domestic solar manufacturing is the need of the hour.
“It is estimated that about 100 GW of solar capacity will be established in the country by 2030. If a sustainable domestic manufacturing industry is promoted, it can save $ 42 billion in equipment imports. It will also create 50,000 direct new jobs and more than 125,000 indirect jobs in the next 5 years. The presence of solar manufacturing within the country will also result in better energy security as it would prevent potential supply side disruptions since the country would not be dependent on imports,” said the paper.
The paper noted that Indian Manufacturing Policy recognises solar manufacturing to be of strategic importance. However, the solar manufacturing industry has been facing challenging times because of various factors including lack of a level playing field and various global factors. These have not allowed the industry to develop economies of scale and an end-to-end supply chain.
Ashwani Sehgal, President, ISMA said, “Indian solar manufacturing is competitive but suffers due to lack of incentives that are provided to solar manufacturers in other nations. About 40% of the India solar producers have shut down with the industry utilisation at just 21%. Countries with ambitious solar energy generation plans such as China, USA and Japan have strongly supported domestic manufacturers through a number of trade and manufacturing incentives to make them even more dominant in the coming years. These measures include loans at reduced interest, credit guarantees, capital subsidies, tax holidays, antidumping measures and preferential domestic procurement amongst others.”
Highlighting the striking similarity of the solar manufacturing industry today with the electronics industry in the past, the report suggests urgent measures to avoid repeating the same mistakes. The country currently imports over $ 30 billion of electronic goods annually making it the 4th largest item in India’s import basket contributing to 23% of India’s trade deficit. This situation could have been prevented, if the electronics industry was supported during the nascent stage. The cost of catch-up today is enormous and despite efforts to prop up the domestic electronics industry, India has not been able to curtail the massively growing electronics imports. This is because many critical drivers such as skilled manpower, economies of scale, R&D capability and the entire ecosystem need sustained government support over a period of time.
According to Santosh Kamath, Head of Renewable Energy, KPMG in India, while supporting domestic manufacturing industry could result in moderately higher price of solar power in the short run, the cost curve would fall in the medium term as scale and supply chains develop. He added, “The concerns over unavailability of solar panels or sharp price rise can be allayed given that adequate manufacturing capacities exist in countries such as South Korea, Japan, Mexico and Singapore. There is a cost difference of about 5-10% between the largest Chinese solar panel supplier and the largest Singaporean solar panel supplier indicating availability of competitively priced imports.”
The report pointed out that that if solar manufacturing is backed by reliable long term demand on a level playing field, there would be substantial investments by solar equipment producers. Some global players may also invest in the country to make the country an export base. The entry barriers for solar capacity creation are low and gestation time for green-field investments is only 6-12 months. Thus a robust domestic industry will not only offset the higher costs of solar power today but would generate additional revenues through investments and taxes in the long run. The net benefit to the Government owing to promotion of solar manufacturing has been pegged at $ 1.1 billion over the next 10 years owing to employment and taxes benefits.
“It is estimated that about 100 GW of solar capacity will be established in the country by 2030. If a sustainable domestic manufacturing industry is promoted, it can save $ 42 billion in equipment imports. It will also create 50,000 direct new jobs and more than 125,000 indirect jobs in the next 5 years. The presence of solar manufacturing within the country will also result in better energy security as it would prevent potential supply side disruptions since the country would not be dependent on imports,” said the paper.
The paper noted that Indian Manufacturing Policy recognises solar manufacturing to be of strategic importance. However, the solar manufacturing industry has been facing challenging times because of various factors including lack of a level playing field and various global factors. These have not allowed the industry to develop economies of scale and an end-to-end supply chain.
Ashwani Sehgal, President, ISMA said, “Indian solar manufacturing is competitive but suffers due to lack of incentives that are provided to solar manufacturers in other nations. About 40% of the India solar producers have shut down with the industry utilisation at just 21%. Countries with ambitious solar energy generation plans such as China, USA and Japan have strongly supported domestic manufacturers through a number of trade and manufacturing incentives to make them even more dominant in the coming years. These measures include loans at reduced interest, credit guarantees, capital subsidies, tax holidays, antidumping measures and preferential domestic procurement amongst others.”
Also Read
Highlighting the striking similarity of the solar manufacturing industry today with the electronics industry in the past, the report suggests urgent measures to avoid repeating the same mistakes. The country currently imports over $ 30 billion of electronic goods annually making it the 4th largest item in India’s import basket contributing to 23% of India’s trade deficit. This situation could have been prevented, if the electronics industry was supported during the nascent stage. The cost of catch-up today is enormous and despite efforts to prop up the domestic electronics industry, India has not been able to curtail the massively growing electronics imports. This is because many critical drivers such as skilled manpower, economies of scale, R&D capability and the entire ecosystem need sustained government support over a period of time.
According to Santosh Kamath, Head of Renewable Energy, KPMG in India, while supporting domestic manufacturing industry could result in moderately higher price of solar power in the short run, the cost curve would fall in the medium term as scale and supply chains develop. He added, “The concerns over unavailability of solar panels or sharp price rise can be allayed given that adequate manufacturing capacities exist in countries such as South Korea, Japan, Mexico and Singapore. There is a cost difference of about 5-10% between the largest Chinese solar panel supplier and the largest Singaporean solar panel supplier indicating availability of competitively priced imports.”
The report pointed out that that if solar manufacturing is backed by reliable long term demand on a level playing field, there would be substantial investments by solar equipment producers. Some global players may also invest in the country to make the country an export base. The entry barriers for solar capacity creation are low and gestation time for green-field investments is only 6-12 months. Thus a robust domestic industry will not only offset the higher costs of solar power today but would generate additional revenues through investments and taxes in the long run. The net benefit to the Government owing to promotion of solar manufacturing has been pegged at $ 1.1 billion over the next 10 years owing to employment and taxes benefits.
| Benefits of booster dose Support a strategic solar equipment manufacturing industry at early state of the life cycle is important because:
|