What it takes to ‘Make Solar in India’

India’s government has made clear its intentions to cultivate a solar PV manufacturing base at home, but interest from foreign players has yet to be translated into major capacity expansions. PV Tech gathered views from various players – both foreign and domestic – about what steps need to be taken, while at the REI Expo 2018 exhibition in Greater Noida, India.

Jeffrey Liu, managing director at state-run Chinese firm CETC, one of the only foreign firms to date to actively set up PV manufacturing in India, told PV Tech that the company is willing to achieve only low profits at an early stage given the enormous potential that the Indian market has for the future. So great is CETC’s faith in the market that it was seriously considering setting up its cell capacity in India well before any discussions of a safeguard or anti-dumping duty came into the public domain.

Liu said China’s ‘One Belt Road’ initiative complements the Indian government’s ‘Make in India’ programme. He also believes that government will protect any manufacturer who sets up within India. However, cell capacity requires a huge amount of investment, so CETC’s 200MW fab is seen as a trial and depending on demand from local module assembly players for its product, it could expand to 600MW or 1GW in 2019 or 2020. The key here is that the firm has not decided to invest in multi-gigawatt factories straight away but prefers to test the water before making a big play investment.

Many early stage announcements of foreign PV manufacturers looking at India have cited the state of Andhra Pradesh as a strong location. Liu said that the economic zone Sri City offers various incentives and amenities related to electricity supply and water treatment among other benefits.

Evolvement step by step

Yan Zhuang, president and COO, Module and System Solutions, at Chinese firm Canadian Solar, the most successful module supplier to India in the year 2017/18 according to Bridge to India, told PV Tech that domestic solar production in India is a “valid proposal” and his company is “seriously considering” this option.

However, Zhuang stressed that this decision would not be majorly affected by any safeguard duty or the Indian government’s attempts to tender out manufacturing capacity. The plan is for a more organic approach based on long-term sustainability of the local manufacturing market.

He said: “It will not be fast. It’s not going to be a revolutionary decision. It’s going to be evolvement step by step.”

Instead Zhuang highlighted the major steps that he believes the government should take to encourage PV manufacturing in India:

  • Finding a way to reduce the costs of production in India;
  • Relieving import duties on materials equipment;
  • Offering training;
  • Reducing electricity prices;
  • Reducing the barrier for foreign investors.

For Zhuang, Indian manufacturing will need long-term support and not just the two years provided by the safeguard duty on imports from China, Malaysia and developed countries. By the time a factory is built in India, the safeguard duty will be at its tail end, while public tendering also gives players little control of the price. He said the only real control focus should be on making sure the Indian-made costs can compete with the Chinese-made costs.

“Right now it’s [around] 10-12% cost difference. Can we make it 6% difference – only 1 cent or maximum 2 cents?” he questioned.

Ramesh Nair, CEO at major Indian developer and manufacturer, Adani Solar, also said that the safeguard duty would fall short at two years, but it will also give a “lease of life” to domestic suppliers and protect against large-scale dumping from China.

“China has already come down to ridiculous prices,” he added.

Echoing CETC’s Liu, Nair said that the Indian solar market is very buoyant with the support of the prime minister and lower prices are back again with the 2.44 rupee per unit discovery this earlier this week.

“The safeguard duty is not hurting the market at all, as module prices have also corrected,” he said.

For Nair the most important method of supporting manufacturing will be to expedite the dispersal of M-SIPS sops that are available to electronics manufacturers. The government should also come out with more manufacturing tenders.

Pranav Mehta, chairman of the National Solar Federation of India (NSEFI) as well as the new chairman of the Global Solar Council, said: “No Indian worth his salt can be against manufacturing of solar panels in India, but safeguard duty, anti-dumping duty is not in the interest of the country. Instead what we should do is create a win-win situation. By this I mean that we should attract technology and investment to produce globally competitive product in terms of price and quality to go to scale.

“For that, one thing that definitely government can provide is interest subvention. In India we pay 10.5-12% interest for the borrowed capital whereas China is paying 3%, Japan is paying 3%.”

Mehta said the government does have the funds available to alleviate this problem including the National Clean Energy Fund among others.

Does India need manufacturing?

At the REI Expo conference session on ‘Make in India’ held by consultancy firm Bridge to India, Vinay Rustagi, the consultancy’s managing director, asked panellists whether India really needs PV manufacturing and what needs to be done to support it.

In the panel, Rakesh Tiwary, CFO Adani Solar, said that reliance on imports is creating a ‘rent economy’ and is using up India’s forex reserves. He said that India needs to create a manufacturing skillset in order to support this base and it needs multi-year visibility of demand for domestically-made PV products.

Arul Shanmugasundram, chief business development, CTO, at Tata Power Solar, said that domestic supply gives assurance that players can get modules at a certain price as there are less variables in procurement, giving “comfort to both parties”, but he also noted that high cost of capital in India is a major issue. With that the challenge for Indian manufacturing is to “keep it alive and sustain”.

“It’s slow growth, I don’t see radical changes,” he added.

Daniel Liu, GM South Asia, at Chinese manufacturer JinkoSolar, said the number one most important thing in attracting players to ‘Make in India’ is policy certainty. The 3GW manufacturing tender parameters have been played with, while the safeguard duty saga dragging on did not give confidence about stability and certainty around policy in the future in India.

“It’s a little bit distracting,” he added.

Noting India’s plan for fully integrated manufacturing that includes wafers and ingots, he said that this requires huge investment and therefore a thorough investigation that takes longer than just two years is necessary. He also suggested that China’s TopRunner policy that prioritises new technology and efficiency over price should set a strong example to India, which is too focused on low tariffs.

Jerome Baco, COO of C&I solar firm Cleantech Solar, representing the downstream sector in the panel, said that even though Cleantech imports almost all of its modules and inverters to India, the company would much rather source locally in order to avoid three import risks:

  1. Foreign exchange rate fluctuation – i.e. the risk of buying in Dollars and selling in Rupees
  2. Difficult logistics of import
  3. Regulatory framework changes such as the safeguard duty which is “freezing the market”

Ultimately, however, Baco agreed with JinkoSolar’s Liu that uncertainty was the biggest factor.

He added: “We would need a dynamic manufacturing market with 2-3-4 more sufficient suppliers to ensure right capacity and to ensure bargaining power. We don’t want to put all the eggs in one basket.”

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