Manufacturers say long-term growth of solar industry possible only if domestic content mandated in solar mission phase II
As the second phase of Jawaharlal Nehru National Solar Mission (JNNSM) is drawing closer, the debate on whether use of domestically produced solar equipment should be mandated in the solar power projects is heating up. The manufacturers of solar equipments who who are demanding a mandate for domestic content requirement and the solar power project developers who would rather import cheap equipment are at loggerheads with each other. The clear divide was seen at the stakeholders consultation organised by the Ministry of New and Renewable Energy (MNRE) on February 15. The consultation was the final round of discussion with the stakeholders before MNRE finalises the policy guidelines of phase two of JNNSM.
Launched in 2010, JNNSM has a target of 22,000 MW (20,000 MW grid-connected and 2,000 MW off-grid) to be installed by 2022. The first phase with a target of 1,200 MW (off-grid and on-grid) will end in March 2013. The second phase has a target of installing 9,000 MW of grid-connected solar power and 800 MW of off-grid application.
Ratul Puri, managing director Moserbaer India, said that developing the domestic manufacturing industry was one of the prime mandates of JNNSM and that the ministry should ensure it. “We are already in a critical situation. I don’t think we will be able to survive next year if domestic content is not mandated,” he said. It is not that Indian industry cannot compete with global players, we just need some time and the support of government, he added. Puri’s views were endorsed by most manufacturers present in the meeting. “It is in the long-term interest of the country if it creates an ecosystem for the growth of domestic solar industry,” said Rahul Gupta, managing director, Indosolar. There was also a demand to keep the policy neutral for different photovoltaic technologies.
In the first phase of JNNSM, use of domestic content was mandated for developers who wanted to use crystalline silicon technology, whereas those using thinfilm technology were allowed to import thinfilm panels. It was done because the country had little experience in the sophisticated thinfilm technology. But this strategy backfired, as most developers have put up solar power plants using thinfilm technology. It happened because Export-Import bank of US provided low interest financing to Indian developers with a condition to use US thinfilm panels. In batch one of phase one of JNNSM, 50 per cent projects used thinfilm technology. In batch two, more than 70 per cent of the projects have used thinfilm technology. This has caused Indian industry going into huge losses.
Importing is cheaper for developers
Most project developers are opposing the manufacturers. They say that they should be allowed to source equipment from where they want. “There should be fairplay,” said Kishore Nair, president Welspun Energy Limited. The focus should be on bringing down the cost of power. Mandating domestic content requirement will work against us in that Indian products are relatively costly,” he added. Representatives from Solar Independent Power Producers Association were also of the same view. Nair also raised concerns regarding the inferior quality of Indian modules.
Project developers also sought relaxation in the project commissioning guidelines. They said that the provision of encashment of bank guarantees if the commissioning deadline is not met is very strict. “The government should explore other ways of penalising the developers if they do not meet the commissioning deadline,” said V Saibaba, CEO, Lanco Solar.
Regarding the domestic content issue, Tarun Kapoor, joint secretary, MNRE said, “The ministry is trying to take a more balanced view keeping in mind the international issues at play.” The United States recently dragged India to World Trade Organisation alleging that India is favouring its Indian industry by mandating domestic content which hinders free and fair trade.
Arrangement of finance for projects was voiced as another big problem by developers as banks are reluctant to lend to the solar industry. “We are constantly in touch with banks to convince them to lend to the solar sector. We have also written to finance ministry regarding the same,” said Ratan P Wattal, secretary, MNRE. He also hinted at finding ways to use the National Clean Energy Fund to make solar projects more bankable. MNRE is expected to finalise phase two guidelines by the first week of March.