The government will offer viability gap funding (VGF) to make solar power equipment ranging from solar cells to finished panels, Union power minister Piyush Goyal said.
Projects to set up solar equipment factories will be awarded based on which bidder seeks the least amount of VGF—a form of financial support from the government to meet the shortfall in the project cost. Goyal said on Friday the parameters of the scheme are being prepared by the power ministry and NITI Ayog. “We will also offer assured procurement of panels from the manufacturing facilities set up with VGF for five to seven years,” said the minister.
The idea is to enable the equipment industry to develop along with the solar power generation industry, for which the government has set up a 100 gigawatt (GW) target to be achieved by 2022, up from the present 6.7GW. The scheme will support integrated factories where every component that goes into solar power generation is produced. At present, India can produce only 1.2GW of solar cells and 5.6GW of solar panels a year, and the rest is met through imports from Europe and China. China controls 70% of the global solar equipment market.
Goyal said he would like the country to have a production capacity of 5-10GW of solar cells a year. Manufacturers said Chinese producers have the advantage of lower cost of financing over their Indian rivals. Also, governments refund the taxes that go into items that are meant to be exported in order to improve their cost competitiveness in global markets. Thus, a locally made panel which attracts central and state taxes will be less competitive against an imported one. Manufacturers said they expect financial support to offset these disadvantages.
According to Naresh Mansukhani, country head (solar), Orange Renewable Power Pvt. Ltd, the domestic photovoltaic cell and panel production industry may take some time to mature. “With the growing requirement, India is expected to see big investments in the manufacturing sector which will help the country become self-reliant and help the domestic industry mature faster,” Mansukhani said. At present, most of the materials are imported as the domestic industry either does not produce them or are not cost competitive.