India plans to support local solar cells and modules makers by assuring contracts for government projects, a note from the renewable energy ministry said, as it looks to scale up manufacturing to cut Chinese imports and avoid legal hassles.
The US is due to take India back to the World Trade Organization (WTO) next month to settle a long-standing solar power dispute, alleging that India has failed to comply with last year’s ruling related to giving preference to local solar equipment makers.
Orders funnelled through a domestic-content requirement (DCR) policy have all but dried up in India after the WTO in September 2016 upheld an earlier ruling that found the move violated global trade norms and discriminated in favour of domestic firms and against foreign competitors.
The new proposal to scale up DCR requirements in government projects with a capacity of 12 gigawatts (GW) aims to protect India’s solar equipment makers facing financial collapse.
The WTO ruling barred India from enforcing DCR clauses for power projects operated by private developers as they are considered discriminatory against foreign competitors.
Under the policy, India will also provide direct financial support of Rs11,000 crore to domestic solar cell and module manufacturers, in addition to subsidies, cheap loans and an exemption of goods required for setting up solar equipment making facilities from customs duty.
India’s solar power generation capacity has almost quadrupled in nearly four years to about 15 gigawatt (GW), and prices have hit record lows amid Prime Minister Narendra Modi’s government push to reduce the cost of power and raise solar energy generation to 100 GW by 2022.
Chinese companies have gained the most from the increase, accounting for around 85 percent of India’s solar module demand and earning around $2 billion, according to industry data, even as local companies such as Indosolar Ltd and Moser Baer India Ltd are struggling to win contracts.
The absence of a complete manufacturing supply chain, higher borrowing rates, obsolete technology and smaller scale have made it difficult for Indian solar equipment makers to compete with their Chinese counterparts.
To address such challenges, the government also plans to create a fund to support technological upgrades and cheaper land and electricity. Manufacturing units would also be allowed to set up power plants with twice the capacity of their module units, according to the note.