Restrictive Guidelines Under Govt Schemes to Impact System Integrators: Report

According to a new analysis, there are two critical restrictive guidelines for integrators in the new KUSUM and SRISTI schemes by the MNRE

According to a new analysis by JMK Research and Analytics, there are two critical restrictive guidelines in the new schemes that the Ministry of New and Renewable Energy (MNRE) has recently launched. Namely, the Kisan Urja Suraksha evam Uthan Mahabhiyan (KUSUM) which was officially launched last month and the Rooftop Phase II (SRISTI) scheme that was recently cleared with an installation target of about 30 GW expected to be achieved by 2022.

This 30 GW target includes nearly 26 GW capacity for pumps and grid-connected systems under KUSUM scheme and 4 GW for the residential segment in the Rooftop Phase II program.

The two guidelines which the analysis marks as restrictive are:

• Mandatory use of only indigenous solar panels (including cells and modules).
• Only pumps and solar panel manufacturers allowed to participate in the bidding process. Thus, excluding the system integrators/ installers from the bidding process.

Presently, in India, the indigenous operational cell manufacturing capacity is only 1.5 GW while the module manufacturing is nearly 8 GW. The analysis reveals that these numbers are way too less than the 30 GW target set under both the schemes.

“In the previously launched CPSU scheme as well, it is mandatory to use indigenous solar panels wherein there is a target to add about 12 GW. The only way to achieve this cumulative target of 42 GW is by scaling up the current cell manufacturing capacity to 22x times and module manufacturing capacity to 4X times of current production capacity, which is a highly unlikely scenario. This demand and supply mismatch will eventually lead to increase in prices of domestically manufactured modules. Thus, impacting overall project costs,” the analysis states.

Another restrictive clause put up by the Government is the exclusion of system integrators/ installers from both the schemes. With new guidelines, only the pump and solar panel manufacturers are allowed to participate in the bidding process under both schemes. The reasons given by the government for this exclusion is ensuring better product quality and post-installation services for the end customers.

“However, KUSUM scheme is about small scale installations across different geographies of India including remote locations. To achieve the target of 26 GW across India, the role of system integrators in very important,” it adds. A few manufacturers won’t be able to achieve this scale.

Key concerns arising from this guideline are:

• It will reduce competition in the market and create a monopoly of a few selected players.
• Panel and pump manufacturers are unlikely to have the resources to provide extensive after-sales services and customer support for the scale/ target set by the government. They, in turn, will subcontract this work to other players, where again quality can be an issue.
• The existing service and installation network of system integrators will not be leveraged if only panel and pump manufacturers are allowed to participate. This is turn will also increase service time for the end consumer.
• System integrators are the key coordinators responsible for service of complete end to end system which includes not only panels and pumps but also Balance of System. If only manufacturers will install these systems then their service area will be restricted to only their product (pump/ panel) and not the whole system.
• Since services are not a core business for most manufacturers, there are chances that the manufacturers will try to push their product rather than focusing on testing of actual site conditions before recommending suitable products.

The analysis concludes with a proposition that both these restrictive conditions should be revisited by the government and a practical solution needs to be identified to achieve the targets set by the government. The government should instead devise mechanisms to ensure that the BIS guidelines are adhered to by the manufacturers and installers when products are procured and installed.