PLI Scheme for Solar Manufacturing Finally Gets Cabinet Approval

Yet another piece in India’s solar manufacturing ambitions fell into place today with the union cabinet, chaired by Prime Minister Narendra Modi, approving the Ministry of New & Renewable Energy’s proposal for the implementation of the Production Linked Incentive (PLI) Scheme ‘National Programme on High-Efficiency Solar PV (Photo Voltic) Modules’ for achieving manufacturing capacity of Giga Watt (GW) scale in high-efficiency solar PV modules with an outlay of Rs.4,500 crore.

Solar capacity addition presently depends largely upon imported solar PV cells and modules as the domestic manufacturing industry has limited operational capacities of solar PV cells and modules. The National Programme on High-Efficiency Solar PV Modules will reduce import dependence in a strategic sector like electricity. It will also support the Atmanirbhar Bharat initiative.

Solar PV manufacturers will be selected through a transparent competitive bidding process. PLI will be disbursed for 5 years post commissioning of solar PV manufacturing plants, on sales of high-efficiency solar PV modules. Manufacturers will be rewarded for higher efficiencies of solar PV modules and also for sourcing their material from the domestic market. Thus, the PLI amount will increase with increased module efficiency and increased local value addition.

The outcomes/ benefits expected from the scheme are as follows:

1. Additional 10,000 MW capacity of integrated solar PV manufacturing plants,
2. Direct investment of around Rs.17,200 crore in solar PV manufacturing projects
3. Demand of Rs.17,500 crore over 5 years for ‘Balance of Materials’,
4. Direct employment of about 30,000 and Indirect employment of about 1,20,000 persons,
5. Import substitution of around Rs.17,500 crore every year, and
6. Impetus to Research & Development to achieve higher efficiency in solar PV modules.

The cabinet approval and new details will be welcomed by manufacturers both existing and aspiring, looking to take the help of the scheme incentives to scale up. The focus on efficiency is also welcome, as the country desperately needs to break out of the low-cost low-quality loop many parts of solar manufacturing, especially that in the MSME sector, is stuck in.

With a high target of solar additions, one has to be optimistic that the scheme will finally nudge solar manufacturing in the country on a fresh growth path. Till the announcement of this scheme, firms had announced plans for almost 15 GW of manufacturing in India, mostly in the form of fresh green field capacity and some expansions.

A key challenge that has come up is the need for backward integration to ingot and polysilicon wafer production levels, as those critical inputs in the value chain are even more strongly dominated by China-based firms. Thus, the risk of an ‘export duty’ on those cannot be discounted, even as India builds fresh cell and module manufacturing capacity.