Import substitution can set climate action back1 min read 29 Mar 2023, 10:47 PM IST
Indian incentives for locally made solar panels have many takers, sure, but we must focus on our aim of an energy transition. Self-reliance behind raised tariff barriers could prove costly
Import substitution under Atmanirbhar Bharat is India’s biggest policy flip since the Cold War ended in a victory for US-style market democracy and we gave up autarkic dreams in 1991 for an open economy in sync with globalization. As an energy transition now aims to reduce Indian dependence on oil imports, which doomed autarky in the old days, might self-reliance fare better this time? The field of renewable power could serve as a test case. With a target of 500GW of such carbon-free capacity by 2030 (we currently have about 122GW), the government is using public funds to spur the local production of solar panels by private players. As announced, the second round of this incentive scheme allotted some ₹14,000 crore to about a dozen companies that’ll make what it takes to convert sunshine into electricity, from polysilicon and wafers to solar cells and modules. Over half that sum will go to three firms: Hyderabad-based Indosol, Mumbai-based Reliance and the US-based new entrant First Solar. Since the idea is to dissuade imports, which accounted for over four-fifths of the panels set up in India until last year, Indian factories will operate behind a big tariff shield. Starting 2022-23, India has been charging a 40% import duty on photovoltaic modules and 25% on cells. By design, local stuff is expected to replace foreign shipments. Whether this lays out a sunny path to a cleaner economy, however, is far from certain.