The government of India said it cannot seek to slow down imports of solar power generation equipment from China as it has to watch out for the interests of Indian consumers as much as those of Indian industrialists.
Responding to questions from the opposition in Lok Sabha on why India was not taking action to help the country’s solar manufacturers, trade minister Nirmala Seetharaman said the government cannot ignore the interests of the consumers when trying to promote local manufacturing.
“While the Government is concerned about domestic manufacturers, our bigger concern is the price of power which is consumed by large number of consumers,” Nirmala Seetharam said in response to questions by Kamal Nath and Jyotiraditya Scindia.
India has a target of installing 7,200 megawatt of grid-connected solar power generation capacity in the current financial year, but is likely to miss it by a wide margin. In the first nine months of the year, it added only about 3,000 MW.
Meanwhile, spurred by the targets, Indian power companies imported $1.96 bln worth of solar photovoltaic cells in the year ended March 2016 — a jump of 225% compared to imports of $603 mln in the previous year.
In the first nine months of the current year, India has imported solar cells worth $1.61 bln, up about 10% compared to last year on an annualized basis. In terms of volumes, the jump will be even higher due to the crashing prices of such equipment.
China’s share in India’s solar cell imports rose to 87.7% in the first nine months of this year from 83.6% last financial year.
China is by far the world’s biggest maker of solar equipment due to its edge in manufacturing the key ingredient in such panels — crystalline silicon, or the black substance that is found in nearly all solar panels.
Crystalline silicon is produced by heating extremely pure sand in electric furnaces at more than 1000 °C.
The technology required to produce silicon and cut it into very thin wafers has been improving rapidly. Given that the costs involved are inversely proportional to the quantity of silicon produced, larger and larger manufacturing plants in China have given an almost insurmountable edge to that country.
Though the technology originated in the USA, China invested in setting up large-scale manufacturing facilities for silicon years before other countries woke up to the potential of the so-called oil of the future. In the US, solar has found the going tough due to opposition from an entrenched fossil fuel lobby.
A few years ago, India tried to control the amount of imports used by companies to produce solar energy under the country’s prestigious ‘Solar Mission’, but it upset power companies and even led to a WTO lawsuit.
Of late though, the government has been taking a lenient view of imports — arguing that it is better to import solar panels that generate ‘free’ electricity for decades than to import oil and coal that disappear on first use. Chinese supplies have become crucial to meeting Solar Mission’s targets.
“In some cases the prices (offered by Chinese vendors) are much lower than what is being offered by domestic manufacturers,” Nirmala Seetharaman said.
“India does not have enough manufacturing capacity currently for solar cells and modules to cover full demand. We are dependent on imports and China is our biggest supplier of solar cells and modules,” Nirmala Seetharaman said.
Imported solar cells are subjected to a 14.7% import charge in the country — largely similar to what domestic manufacturers have to pay in terms of duties and taxes.
The government has unveiled various encouragements for solar manufacturers in the country, including capital subsidies, a tax holiday of 10 years, generation incentives, accelerated depreciation, viability gap funding), inclusion of solar rooftop systems as part of home loans, concessional excise and custom duties, and allowing direct foriegn investment under the automatic route.
“Government is balancing both these categories by allowing imports to increase the generating capacity and providing support to domestic manufactures through a provision of reserving some capacities for domestic cells and modules which gives assured market to domestic manufacturers,” the minister added.