In his Independence Day speech on the 15th of August, Prime Minister Narendra Modi invited Indian and international companies to come to India to manufacture, or in his words “make in India”. A decision on anti-dumping duties (ADD) is due this Friday (22nd August). On the face of it, it might seem that ADD supports “make in India”, however, this is a fallacy. In reality, ADD will hamper manufacturing of solar cells, modules, inverters and other Balance of System (BOS) components in India because it will set back the market as a whole.
- The prime driver for solar manufacturing in India is the domestic market size
- The imposition of ADD will shrink the market size by over 67% in the next year
- In order to encourage domestic manufacturing the focus should be on reducing, not increasing the cost of solar in India
Indian cells and modules manufacturing requires investments in scaling up to become globally competitive. The predicted growth and size of the domestic market would be the prime driver of investment in solar cells and modules manufacturing. In 2013, India was ranked 12th globally in terms of cumulative installed capacity. The installed base is significantly smaller than in Germany, China, Japan and USA.
Figure 1: Cumulative installed solar capacity by 2013[1]
According to BRIDGE TO INDIA’s estimates, an imposition of ADD will result in an increase in the cost of solar power by about 10%, making many projects unviable. As a result, India would only add around 500 MW in the coming year. This is a reduction by over 67%.[2] Such shrinking of the market will have an adverse long-term impact not only on cells manufacturing but also on modules, inverters and other BOS manufacturing.
Large global inverter manufacturers such as ABB, Bonfiglioli, Advanced Energy (erstwhile Refusol) and TMIEC (erstwhile AEG) have decided to manufacture in India without any protectionist measures or incentives. These manufacturing capacities have been set up due to a belief in the strong market growth in India. A policy measure in the form of ADD will affect these investments in India and hamper investor confidence. This is just one example of how protectionism derails the “make in India” proposition.
The levying of ADD is not the answer to the inherent problems of domestic solar cells and modules manufacturers. Instead, domestic cells and modules manufacturing should be supported by incentivizing them directly based on a sound long-term business plan, and by providing clarity on the future demand through policy stability. The government should focus on measures that reduce the cost of solar power in India. This would bring all interests in the market into alignment and help the market grow. Incentives could include- making available low cost power and land without encumbrances, providing a rebate on excise and customs duties or providing cheap loans.
[1] Source: PVPS Report Snapshot of Global PV 1992-2013, http://bit.ly/1fwoM3s
[2] Refer to our India Solar Compass July 2014 edition, http://bit.ly/1hLVfRD
Mudit Jain is a consultant at BRIDGE TO INDIA
