Reverse auction must be done away with in solar: Vikram Solar vice chairman

Gyanesh Chaudhary, vice chairman of Vikram Solar Limited has an issue with the Production Linked Incentive (PLI) scheme for the space his company operates in, and expresses reservations about a large part of the PLI going into polysilicon-based integration. Convinced that this is not the best way to use the scheme, He tells S Dinakar in an interview that PLI should have gone front end into wafer cell and module optimisation. He also believes that reverse auction or reverse bidding needs to be done away with in solar, just as it has, in the case of wind. Edited excerpts:

What are your expansion plans in light of PLI and Approved List of Models and Manufacturers (ALMM) for solar module manufacturing?  

Vikram Solar’s current capacity of 2.5 Gw is slated to rise four-fold to 10 Gw in the next five years, and we want to add integration under the aegis of the PLI solar manufacturing scheme. The PLI will act as a huge initiative for private investments to spur. Our PM talked about net zero by 2070. So that means bringing 500 Gw of renewables during that period. Currently, we are sitting at 50 Gw of solar, far from our target and to achieve this huge leap, solar manufacturing capacity is required. Back in 2007, India and China were running neck and neck with respect to the whole phenomenon but due to the movement of a huge amount of capital and very aggressive plans, China set up large capacities in manufacturing and started catering to both internal and global demand.

Regarding the new outlay for solar manufacturing, why has the government increased the outlay for the solar PLI scheme by Rs 19,500 crore. Was the first Rs 4,500 crore inadequate?

The first instalment so to speak was ineffective. We, as an industry, have been asking for a much larger share of the pie. When we talk about the value chain in solar we talk about polysilicon, wafer, module being the last-mile product that goes into solar farms. Now polysilicon is a completely different activity. It’s like setting up a refinery. So we proposed that you take out polysilicon and create separate schemes to promote it, because not all private sector players will be interested in it, whereas the government currently needs last-mile cell and modules in large numbers. That did not happen. We see now a large part of PLI going into polysilicon-based integration which is going to happen over the next five years or so. It’s still a start but definitely not the best way to use the PLI. It should have gone front end into wafer cell and module optimisation.  

What happened to your 3.6 Gw PLI bid under the first phase? Did you qualify?

It’s a contentious issue and I think there will be certain challenges in achieving closures on those bids. As it turns out, the new PLI scheme is in the draft stage and we will certainly be a contender in that scheme.

Does the second phase iron out those contentious issues? Were the latest policies announced in April on tariff and non-tariff barriers a reason for you go for such big investment plans?

I hope it’s sorted. We waited two years for this PLI to come through. In the next five years we look at investing $750 million in this infrastructure to create 10 Gw of capacity. As manufacturers, we look at a level playing field. Indian manufacturing capacity is at around 15 Gw. But you see what’s happening. ALMM is announced on April 1, and then deferred to October. Developers find ways to circumvent basic customs duty through the movers scheme; another way is through the project imports scheme of five per cent to circumvent customs duty.

Developers say Indian manufacturers deliver poor quality and have inadequate capacities for ALMM to work...

Unfortunately, Indian developers do not plan well in advance and eventually projects get delayed or stalled and manufacturers get blamed. If Indian manufacturers didn’t have quality, we wouldn’t be exporting such large volumes overseas. Developers choose to delay buying decisions till the last minute because they want prices to come down. When prices of polysilicon went up last year and they were left high and dry, they blamed us for not having capacity or quality. It’s a vicious cycle. When you are bidding at a price so low what are you left with--margins or prices to give to module manufacturers? Developers have no control over 65 per cent of costs but still go out and bid at Rs 2.15 a unit. Last year commodity prices rose by 40 per cent.

Today even an import module price from China is not catering to the IRR in the Indian projects. This reverse auction or reverse bidding that has been done away with in wind also needs to be done away with in solar. It’s the most important initiative the government needs to take.

You recently won an export order from the US. Do you get a better realisation in America and Europe than in India?.

There’s definitely slightly improved economics in selling to the US, but the larger part is we have a better runway. The decision-makers are much more planned and organized and the international business hedges us naturally to the dollar. So in the current context of the rupee taking a hit, exports definitely make it worthwhile.