Home >Industry >Energy >Lack of backward integration will hinder domestic solar manufacturing: Icra
Photo: Bloomberg
Photo: Bloomberg

Lack of backward integration will hinder domestic solar manufacturing: Icra

  • Timely implementation of notified schemes through time bound award of projects and availability of power supply agreements with the ultimate off-takers remains critical, Icra said

MUMBAI: The Centre may have have increased its focus on domestic solar module manufacturing through a host of “Make in India" initiatives, but lack of scale and backward integration in the process for a majority of such producers are likely to pose constraints in executing orders, credit ratings agency ICRA has said.

The Centre's efforts are likely to result in a favourable order pipeline of about 35-40 GW over the next three-five years for domestic solar original equipment manufacturers.

The government has formulated various schemes in the last one year such as the Central Public Sector Undertaking (CPSU) Scheme which envisages installation of 12 GW solar power capacities by FY2023 with a defined sourcing requirement from domestic module manufacturers. Besides, the Ministry of Railways has a plan to meet 10-15% of its energy requirements through solar power over the medium term by setting up about 3 GW of projects on barren land available alongside the railway tracks. In addition, there has been a greater thrust on the domestic manufacturing linked orders by Ministry of New &Renewable Energy (MNRE).

“Business outlook for domestic solar OEMs remains strong over the medium term, given the greater thrust towards encouragement of domestic manufacturing," Sabyasachi Majumdar, Group Head & Senior Vice President, ICRA , said in the note. “This is evident from the schemes already notified such as the CPSU scheme (12 GW), KUSUM scheme (10-25 GW), Railways (2-3 GW) and domestic manufacturing linked orders (12 GW)."

"...timely implementation of the notified schemes through time bound award of projects and availability of power supply agreements (PSAs) with the ultimate off-takers remains critical. Further, the lack of scale and backward integration in solar module manufacturing process for a majority of module manufacturers are likely to pose constraints."

Icra notes that the Indian solar sector has been import dependent with respect to procurement of cells, modules and other equipment given the cost competitiveness of imports as compared to domestically manufactured products.

The safeguard duty on cells and modules imports from China and Malaysia, currently at 15%, is about to expire in July 2020.

“Thus, the long-term policy clarity on customs duty trajectory post July 2020 as well as other concessions (either fiscal or financial, if any) is now awaited to promote domestic manufacturing till scale & cost competitiveness improves for domestic OEMs," Girishkumar Kadam, Sector Head & Vice President, Icra said.

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