India’s annual domestic manufacturing capacity for solar cells is about 3 GW, or 15 percent of the country’s requirement of 20 GW. A capacity of one watt costs about Rs 62 for India-made solar cells and it costs nearly Rs 25 for Chinese solar cells. The solar power tariffs in India have fallen in nominal terms from INR 15 /Kwh in 2009 to INR 2.44/ Kwh in 2017, due to decline in module prices and improvements in capacity utilization factor.
Developers, however, must still deal with one major issue: the proposed introduction of anti-dumping duties on imported solar panels a few months from now, which might slam the brakes on growth. This move could push up tariffs, hitting project viability.India Is Said to Consider 7.5% Tariff on Imported Solar Panels. Duty on import of solar modules may hurt record low tariffs. To protect domestic manufacturers, India has proposed a 70 percent duty on solar cells and modules imported from China, Taiwan and Malaysia, which currently supply 90 percent of India’s requirements.This will increase project costs by about 25 percent. That’s because solar modules contribute about half the costs and developers meet 84 percent of the demand through imports. Lower panel costs allowed power producers to quote cheaper tariffs to win bids as India targets to increase renewable energy capacity threefold to 175 gigawatts by 2022. States are used to buying affordable power at Rs 2.5 per unit and suddenly with a 70 percent safeguard duty on panels, it will go up to Rs 3.7-3.9 per unit. Experts are of the view that 10 percent safeguard duty is better as it will increase the tariff by 10-15 paise which is affordable.
The ministry is planning to offer “direct financial support” of Rs 11,000 crore and a ‘technology upgradation fund’, for solar manufacturing. The Ministry notes that the country has installed capacity for producing 3.1 GW of cells and 8.8 GW of modules (cells are used to make modules). However, “even this capacity is not being fully exploited because of obsolete technology. As per the ministry, Only 1.5 GW of cell manufacture and 3 GW of module manufacture is used. The Ministry is thus planning to bring in a ‘Technology Upgradation Fund’, i.e capital subsidy for technology upgradation projects. Apart from providing financial incentives for solar manufacture, the Ministry also proposes to “revive” the ‘domestic content requirement (DCR)’ scheme, the government proposes to get central government-owned companies to set up 12,000 MW of projects using local-made products. It is also planning to offer capital subsidies to those who set up solar manufacturing capacities.If these incentives are seriously implemented and there is clear market visibility of the next five years, then more manufacturers may decide to establish manufacturing units in India.