New Delhi: Finance minister P. Chidambaram on Monday announced the setting up of four large solar power projects to boost the renewable energy capacity in the country, just days after the US protested India’s policy to give preferential treatment to domestic manufacturers of solar equipment.

“It is proposed to take up four ultra-mega solar power projects, each with a capacity of over 500 megawatts (MW) in 2014-15," Chidambaram said in his interim budget speech.

These projects will be part of the Jawaharlal Nehru National Solar Mission that was launched in 2010. The first phase of the mission added 1,684MW of grid-connected solar power. The mission aims to add 20,000MW of grid-connected solar power to the country’s energy mix by 2022.

All four projects will be using the solar photovoltaic (PV) technology, said Tarun Kapoor, joint secretary, new and renewable energy ministry.

While one will be set up in Rajasthan and the second in Gujarat, two will be in Jammu and Kashmir, Kapoor said.

This comes in the backdrop of the US dragging India to the World Trade Organization (WTO), citing a clause in the solar mission that says locally manufactured, rather than imported, equipment should be used to build solar plants.

“These domestic content requirements discriminate against US exports by requiring solar power developers to use India-manufactured equipment instead of US equipment," US trade representative Michael Froman said last week. “These unfair requirements are against WTO rules, and we are standing up for the rights of American workers and businesses."

India’s national action plan on climate change recommends that the country generate 10% of its power production from solar, wind, hydropower and other renewable sources by 2015, and 15% by 2020. India has an installed power generation capacity of 2,27,356.73MW, of which 12.4% or 28,184.35MW is renewable energy.

The government in January announced the setting up of a large solar project with a cumulative capacity of 4,000MW in Rajasthan. Six public sector units—Bharat Heavy Electricals Ltd, Solar Energy Corporation of India, Hindustan Salts Ltd, Powergrid Corp. of India Ltd, SJVN Ltd (Satluj Jal Vidyut Nigam) and Rajasthan Electronics and Instruments Ltd—are involved in the project.

“India, due to its geophysical location, receives solar energy equivalent to nearly 5,000 trillion kWh/year. This is far more than the total energy consumption of the country today. Currently, India has about 2 gigawatts (GW) of grid connected solar PV capacity. While India receives solar radiation of 5 to 7kWh/m2 for 300 to 330 days in a year, power generation potential using solar PV technology is estimated to be around 20MW/sq. km. and using solar thermal generation is estimated to be around 35MW/sq. km," Bhel said in a statement.

The sector applauded the move.

“We welcome four 500MWs of solar project as we do see similarities to the UMPP (ultra-mega power plants) policy of the government where developers have to mandatorily source their main plant equipment from domestic manufacturers," said Deepak Puri, chairman and managing director, Moser Baer India Ltd.

The announcement “will accelerate the process of solar installations in the country", driving demand for components and boost engineering, procurement and construction activity, according to Amol Kotwal, associate director, energy and power systems practice for South Asia at consulting firm Frost and Sullivan.

“The solar-based UMPPs have been planned with the core objective of reducing the price of solar energy and rapidly scaling up solar-based capacity in India," Kotwal said.

In another development, the interim budget indicated an alignment of petroleum product prices with market rates by announcing a fuel subsidy of 65,000 crore.

“We have this year absorbed the rollover of 45,000 crore from the fourth quarter of 2012-13 and we will roll over only 35,000 crore from the fourth quarter of this year into the next year," Chidambaram said in his speech.

The provision for lower petroleum subsidies will necessitate the government to pass on more cost of crude to diesel, cooking gas and kerosene consumers, according to Deepak Mahurkar, leader, oil and gas at PwC India, a consultancy. “For the development of the petroleum sector, that is welcome," Mahurkar said. “However, the attempt here onwards to keep oil companies’ share of subsidy burden with a pre-determined ceiling seems difficult to succeed."

The government compensates state-owned oil marketers such as Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd for the losses from selling fuel below cost for cooking gas. Such losses of oil marketers this fiscal are expected to be 1.41 trillion.

PTI contributed to this story.

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