Govt support to domestic solar manufacturing will lead to energy security, report says CHENNAI: The Indian governments intent to recognize the strategic importance of solar manufacturing in the country needs to be backed with measures to help provide a level-playing field to build an economic scale and a supportive supply chain, according to a white paper on solar manufacturing in India brought out by the Indian Solar Manufacturers Association (ISMA) and consultancy firm KPMG. The Indian Manufacturing Policy recognizes 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. About 40% of the Indian solar cell manufacturers have shut down with industry utilization at only 21%. The industry has suffered due to sudden and sharp price declines due to global over-supply and lack of a level playing field, the report said. According to the report, about 100 GW of solar capacity is expected to be added in the country by 2030, and 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 over 125,000 indirect jobs in the next five 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, the report said. The report compares the solar manufacturing industry with the electronics industry. The country currently imports over $30 billion of electronic goods annually making it the 4th largest item in Indias import basket contributing to 23% of Indias 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, we have 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, the report said. Indian solar manufacturing is competitive but suffers due to lack of incentives that are provided to solar manufacturers in other nations. 40% of the India solar producers have shut down with the industry utilization at just 21%. Countries with ambitious solar energy generation plans such as China, the US 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, Ashwani Sehgal, president, ISMA, said. 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. 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, Santosh Kamath, head of renewable energy, KPMG India, said. Manufacturing costs are currently high due to lack of a scale, insufficient government support (other countries have provided massive loans, tax holidays, subsidized utility services, easy access to land and technology support) and an underdeveloped supply chain -Indian manufacturers have no access to domestic upstream raw material supplies of polysilicon and wafers, the report said. By encouraging solar manufacturing, the Indian government would be a net beneficiary as jobs would be created and taxes will increase. If this is done, by 2024, direct taxes on salaries would be $90 million, direct taxes on manufacturing would be $870 million, according to the report. Source: The Times of India
Posted on: Fri, 01 Aug 2014 08:48:32 +0000
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