India may check use of foreign equipment in solar projects

New Delhi: India plans to use technology to police solar projects to ensure that they use Indian equipment, a move termed commendable by an expert who also warned that it could run afoul of the World Trade Organization (WTO) rules.

Government guidelines released recently specify that components used in the manufacturing solar photovoltaic modules (an array of specialized cells that convert light into electricity) must be made in India. Only Indian modules should be used by solar power project producers if they wanted to claim subsidies under the Jawaharlal Nehru National Solar Mission (JNNSM), they say.

The guidelines have been reviewed by Mint.

This mission is one of the planks of the United Progressive Alliance government’s response to climate change, in which it proposes—in the first phase—to install nearly 1,000MW of grid-connected solar power by 2013, at the cost of Rs20,000 crore.

The Centre proposes to do this, using subsidies and energy certificates and making good the extra capital costs incurred by power producers in generating solar electricity. Currently, it costs about Rs15 to produce a unit of solar electricity, significantly more than the coal-based approach, which costs Rs4-6.

Though at a nascent stage, officials at the Ministry of New and Renewable Energy (MNRE), one of the key coordinators of JNNSM, say they are contemplating a variety of mechanisms from the use of Radio Frequency Identification technology (RFID) to surprise checks at power developer facilities to ensure that the parts used aren’t imported ones.

RFID technology, much like its predecessor—the bar code—allows specialized tags to be fixed on products. These tags can contain a variety of information, including manufacturer details, that can be used to trace the origin of the components.

“Unless there is a local manufacturing base and the power produced is consumed internally, the mission will not be successful. In special circumstances, there may be some imports allowed only to aid local manufacturers but no large-scale procurement of parts will be allowed,” said B. Bhargava, a senior official at MNRE involved with JNNSM.

An expert with a leading Indian computer manufacturer, who didn’t want to be named, cautioned that India’s intent was commendable, provided the country didn’t run afoul of commitments under WTO agreements. “It’s different from the 1980s when India’s IT hardware industry failed due to the lack of a manufacturing policy. Today, the post-WTO world is different. Completely Indian parts would boost local manufacturing but I’m not sure government can completely go through with this.”

Bhargava added that the policies would be “mindful” of WTO.

India’s solar industry is projected to generate $3 billion (Rs14,040 crore) in revenues by 2013, say analysts, who add that it will largely be led by domestic consumption. Though existing project are dominated by state-run power utilities, early private sector entrants to the market such as Moser Baer India Ltd rely on manufacturing solar components or European consumers.

“It looks like the government has learned from its mistakes in the electronics hardware manufacturing sector,” said Vinnie Mehta, former executive director, Manufacturers Association for Information Technology, a leading lobby for the IT sector. “This could have significant impact on the semiconductor industry,” he added.

A Moser Baer spokesperson welcomed the government’s proposal.

“The government’s proposal is welcome as it would ensure that Indian taxpayers’ money is not utilized in growing the manufacturing capabilities of others,” he said in an emailed response. Leading international manufacturers in the solar photovoltaic space are Germany and the US, who have more than two decades of expertize in the sector.