The imposition of 40 per cent custom duty on imported modules and the PLI scheme’s benefits may make domestic module competitive by 2-3 cents per watt at current prices
In light of India’s ambitious commitments in the COP26 summit held last year, a report by CRISIL has shown that India’s solar module manufacturing capacity is set to rise by almost 400 per cent by fiscal 2025, compared with fiscal 2021.
The trend will be supported via strong demand, favourable policies, likely improvement in energy efficiency, and price competitiveness. Besides, with the government supporting domestic manufacturers through policy measures, their competitiveness relative to the Chinese is expected to improve.
The imposition of 40 per cent custom duty on imported modules and the Production-Linked Incentive (PLI) scheme’s benefits will not only eliminate the existing price gap, but may even make domestic module competitive by 2-3 cents per watt at current prices, Crisil said.
Consequently, India’s solar capacity implementation is expected to rise to 14 GW per annum between fiscals 2022 and 2024, and further beyond that given aggressive renewable energy plans, which is expected to drive demand for cells and modules.
In addition to price competitiveness, developers may prefer domestic modules because they get better control of the supply chain and timely supplies compared with imports. It will also help developers offset risks from surging freight cost seen in the recent past.
The tariff barriers on imported solar modules will make domestic solar projects unviable. A better approach is to give special incentives to lowest cost global companies to manufacture in India.