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Indian Solar Industry: Uncertainty or Solidarity of Growth

May, 2014, New Delhi

Every difficult situation is an opportunity to grow further. The Indian solar power industry seems to have been in a similar situation now. The industry started with a thump in 2010 after the announcement and launch of Jawaharlal Nehru National Solar Mission (JNNSM) by the government of India. In 2012 it got stuck in the middle of anti dumping allegations involving, suppliers from four countries, Indian domestic manufacturers and power producers which led to a probe by the Indian government against the exporters of solar equipment.

The probe, which concluded in May 2014, has produced evidences supporting dumping of solar equipment into India by the US, China, Taiwan and Malaysia. The Directorate General of Anti-Dumping (DGAD) started an investigation in November 2012 based upon a case filed by domestic manufacturers of solar cells accusing exporters from China, the US, Malaysia and Taiwan of dumping solar cells and modules into the Indian market. According to a document, released by the ministry of commerce & industry, summarizing the probe and as reported by Bloomberg the findings say the exports from more than 20 suppliers of the aforesaid four countries were made at about the third of the domestic prices in India. The exported equipment were priced at about half of their costs to gain market in India. The summary suggested towards the ministry recommending import duties from solar cells and modules from the US, China, Malaysia and Taiwan.

The investigation benefiting the domestic solar cell manufacturers and initiated by the Indian Solar Manufacturers' Association (ISMA) representing the domestic players was widely opposed and criticized by the power producers and their representative bodies namely, National Solar Energy Federation of India (NSEFI) and Solar Independent Power Producers Association. The case has so far divided the solar market into two opposing sides and two opposing viewpoints, the industry stands divided with manufacturers and producers standing face-to-face each. Benefit of one segment would hurt the other one.

Imposing import duties will bring imported equipment at par with the domestic equipment and thus are expected to create a level playing field in terms of prices. The Union Ministry of New and Renewable Energy (MNRE) is expected to make it mandatory for power producers to procure domestic crystalline silicon as well as thin film based cells for solar panels in the second phase of the Jawaharlal Nehru National Solar Mission (JNNSM). But as claimed by the solar power producers India made cells lack quality and are costlier than imported ones, thus will increase the production cost. Project developers have number of advantages in using imported products including price, quality, regular supply and also cheap financing. Most important of all imports help achieve JNNSM solar production objective in terms of quantity of power produced, lower rates of power and thus wide spread distribution and reach of the power and the project. The attractiveness of solar energy generation itself may outweigh any other incentive. The growth prospects of India's solar power industry are bright and enormous. Both demand and supply sides present a good prospects; vast number of consumers due to high population supporting the demand side while abundant supply of sun shine and availability of land for putting up of solar plants boosts the supply side. The industry life cycle stage is then perhaps the biggest and the most fundamental factor. The early and nascent stage of the industry offers it a long term growth prospect. But all this would come at financial and production loss of domestic manufacturers.

However, JNNSM also features and stresses upon the complete development and growth of solar industry which includes equipment manufacturing. As industry experts believe, the current status of solar manufacturing is not very encouraging in India, however, it will take much efforts, support and time to truly develop domestic industry and make it competitive among the global players. They face challenges in technologies and financing front and now also in finding market for their products. They will have to make the prices competitive and bring technology at par. Therefore, it is widely believed that just mandating domestic content would not solve the problem and boost the industry. On the other hand it may delay the project, increase the project costs and tariffs. The year 2013 saw many delays due to several factors, one of them being the depreciating rupee, which was significant. This could become a regular event in case of mandating domestic content for solar production.

But then we cannot for long ignore the domestic industry and their problems and the government targets to promote solar manufacturing industry in India as this is one of the objectives in JNNSM. The government would be needed to provide policy support and investments. The choice has to be made for the future direction of the industry, whether to focus on cheap power production for the nation at the cost of manufacturers or to take steps to develop the solar industry as a whole and build a technology driven solar manufacturing base.



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