Witnessing exponential growth, India’s solar cell and PV module capacity has grown from 3 GW to 6.6 GW and 18 GW to 38 GW respectively. At this pace, the country is expected to be self-sufficient in solar photovoltaic (PV) module manufacturing in another 3 years, making it the second-largest PV manufacturer after China.
India’s collective module manufacturing nameplate capacity has more than doubled to 38 GW in March 2023 from 18 GW in March 2022. As per the report published by JMK Research & Analytics and the Institute of Energy Economics and Financial Analysis, it is expected that the country will achieve about 110 GW of module production by 2026. With this, it is estimated that India will be a self-sufficient nation in solar photovoltaic (PV) module manufacturing, making it the second-largest PV manufacturer after China.
In September 2022, the government approved Rs 19,500 crore for the production-linked incentive (PLI) scheme on the ‘’national programme on high-efficiency solar PV modules’’ with an objective to attract Rs 94,000 crore investment in the sector. The PLI scheme has proven to be a growth pusher for the PV manufacturing ecosystem in India. It aimed at reducing import dependence of the country in the area of Renewable Energy and thus, strengthening the Atmanirbhar Bharat initiative while generating employment. Apart from this, states are pitching in to promote domestic solar manufacturing through fiscal and non-fiscal incentives under industrial, electronics, and solar policies.
As per Jyoti Gulia, the founder of JMK Research, “The production-linked incentive (PLI) scheme is one of the primary catalysts spurring the growth of the entire PV manufacturing ecosystem in India.” She also stated that besides the augmentation of infrastructure in all stages of PV manufacturing, from polysilicon to modules, it will also lead to the simultaneous development of a market for PV ancillary components, such as glass, ethylene vinyl acetate (EVA), and backsheets.
The report added that the two tranches of the PLI scheme will help add 51.6 GW of module capacity and at least 27.4 GW of integrated ‘polysilicon-to-module’ capacity in the next three to four years. PLI shall enable India in achieving one of the lowest module prices in the world. Moreover, the country is going to have a notable presence in all upstream components of PV manufacturing, such as cells, ingots/wafers, and polysilicon.
Another major factor contributing to the exponential growth of India’s solar PV manufacturing industry is frequent announcements of expansion or new investments in the sector. Additionally, the fact is to be noted that the government has taken various steps to boost demand for domestic solar PV modules. One of them was the introduction of the Approved List of Module Manufacturers (ALMM) in 2019. ALMM has proven to be the most important driver for the development of domestic PV manufacturing.
This year, the Ministry of New & Renewable Energy (MNRE) kept the ALMM for solar PV modules in abeyance for FY24. The action offers relief to solar PV manufacturers, as solar modules can now be imported till April 2024 without the ALMM restriction. In the latest ALMM list of MNRE released in February 2023, there were 70+ domestic manufacturers with an enlisted capacity of 22,389 MW.
Additionally, MNRE announced the basic customs duty (BCD) on imported solar cells and modules. The BCD on solar modules (HSN Code: 85414012) imposed is 40%, and 25% on solar cells (HSN Code: 85414011).
While the PLI scheme is a hero player here, the government has taken multiple other measures to promote the demand for locally-made solar modules. Under some of the current schemes of the Ministry of New & Renewable Energy (MNRE), the domestic content requirement (DCR) was introduced. It includes CPSU Scheme Phase-II, PM-KUSUM, and Grid-connected Rooftop Solar Programme Phase-II, wherein government subsidy is given, and it has been mandated to source solar PV cells and modules from domestic sources.
Certainly, the initiatives have positively impacted trade statistics compared to previous years. India exported solar cells and modules worth $157 million in the third quarter (Q3) of CY 2022, registering an upsurge of 642% YOY compared to 21.17 million, according to Department of Commerce data. The significant rise in solar exports is due to the absence of competition from imports, increased domestic production of cells and modules due to PLI, and import restrictions in the U.S. It is to be noted that more than 9 GW of production lines have been commissioned in the previous two quarters. On the other hand, imports of solar cells and modules during the quarter noticed a sharp decline by 59% YoY to $394 million as a result of Basic Customs Duty (BCD) and ALMM.
India was dependent on China for 80% of its equipment until a couple of years ago. Today, it is fair enough to conclude that the potential for India to export its modules is bright. The country is preparing itself to expand its reach to international grounds. Upon reaching self-sufficiency, India can present itself as an alternative to China in terms of quality and price.