PLI Scheme for Solar Manufacturing to Benefit Incremental Demand till FY30: Report

According to a new report India’s solar modules manufacturing under production linked incentive (PLI) scheme will benefit incremental panels demand till the financial year 2030 (FY30).

Ind-Ra estimates that the allocation of INR 45 billion towards the solar modules manufacturing industry by the Ministry of New and Renewable Energy (MNRE) can benefit the sales of 20 GW from the capacity developed under the under PLI scheme across the five-year implementation period, assuming 100% localization (up to 30 GW in case of 65% localization). Also, the scheme can promote an additional 8-12GW annual solar cell/module manufacturing capacity in India. Providently this estimate assumes the base PLI rate of INR 2.25 per watt power and entirely greenfield expansion.

The report depicts that the PLI scheme was started for good but, it can address only a fraction of the demands. India has set a goal to install 280 GW of solar power plants by FY30 out of which about 240 GW is under pipeline or yet to be achieved. Hence, only 8-13 percent of this planned requirement is going to benefit directly from this PLI scheme till FY30, apart from improving the domestic manufacturing capacity.

The report estimated the benefits based on actual performance and concluded that “The PLI rate will defer with the efficiency and temperature gradient quotient claimed at the time of bidding and will vary between INR2.25 and 3.75 per watt power, benefitting players to invest in better technology. Also, more benefits will be available with the increased localization of raw materials. However, the bidders will in no case be eligible for any PLI over and above the requirement quoted by them for a particular year. Bidders will be selected based on a pointer system-based grading for the extent of backward integration and manufacturing capacity.”

Ind-Ra says, as per MNRE notification dated 30 March 2021, the overall extension in timelines for commissioning of solar power generation projects is limited to six months and solar power developers need to commission projects well before 1 April 2022, when comes in the 25/40 percent basic customs duty for solar cells and modules, respectively. Hence, domestic manufacturing will take time to step up. So, the solar developments should have domestically manufactures solar modules to combat such risks in the long run.

The report concludes that the PLI schemes are beneficial but, the timeline restrictions for commissioning may cause problems. At last, it says, “All in all, this a good start, but timely disbursements, ease of processes and scaling up the scheme amount will be key things to look out for over short to medium tenure to see India self-reliant and simultaneously being economically viable to meet its solar power ambitions.”