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NEW DELHI : The government has kept on hold for at least a year its decision to grant foreign manufacturers, including those from China , permission to feature in the approved list of solar photovoltaic (PV) models and manufacturers (ALMM), two people aware of the development said.

The non-approval to foreign companies is being viewed as a non-tariff barrier to stop solar equipment imports from Chinese companies, which supply a major chunk of equipment for solar power projects.

Equipment of firms on the ALMM list can be sourced for government-supported schemes and projects from where electricity discoms procure electricity. Manufacturers and solar modules are to be approved by the Bureau of Indian Standards (BIS) and the ministry of new and renewable energy (MNRE).

Further, in order to be included in the approved list, MNRE representatives have to inspect the facilities in China and conduct a production and sale audit. The go-slow plan is aimed at lowering imports from China amid tensions and to boost India’s domestic manufacturing, with the government launching a production-linked incentive (PLI) scheme for making solar modules in India.

The MNRE issued an order on 10 March 2021 enforcing the list, which features around 23 manufacturers.

“Although Chinese companies have applied for inclusion in the list, they have not so far received approvals, as the concerned inspection team has not been able to visit their factories in China due to the pandemic," one of the two people cited above said.

The move, many industry participants believe, is a non-tariff barrier over and above the tariff barrier implemented in April this year in the form of a 40% customs duty on the import of modules.

According to industry participants, these barriers have hit the solar power sector as a large portion of solar PV modules were generally met through imports and China is a major supplier.

“In solar modules, there is a fundamental issue; not only is there a 40% duty on import of solar modules, there is also an ALMM requirement, which is approved.... and therefore, importing modules from China is becoming difficult, except for projects that were grandfathered. ALMM means that right now, no non-Indian firms have been allowed for certification; therefore you can’t import," said a solar industry participant, who did not want to be named.

There are concerns that the move will impact India’s energy transition goals, and experts fear that it would impact the capacity addition over the next couple of years, although domestic manufacturing is set to pick up in the years to come with major policy efforts, including the 19,500 crore PLI initiative.

Imports have so far been the only major source of solar module supplies, and the bar on imports is likely to cause a supply constraint for solar projects in the short term, for around two years, according to sector experts, as the domestic supplies of modules is not adequate as of now to meet the demand.

Another top executive at a solar power company said that although the primary objective of the government is to increase domestic production and reduce import dependence, most of the components to manufacture modules, ranging from solar cells to solar glass and laminating equipment, have to be imported. Further, the government has also imposed a 25% custom duty on solar cells and an anti-dumping duty is enforced on solar glass, thereby making the production process expensive, which eventually may get passed on to power consumers, said the executive.

According to a report by the Institute of Energy Economics and Financial Analysis, module costs form 65% of initial capital expenditure for a typical solar project, hinging project viability on their trajectory. Therefore, the increase in cost of solar modules significantly can significantly overall cost of the project.

Queries sent to MNRE remained unanswered till press time.

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