Budget expectations for solar manufacturing


The Indian solar manufacturing sector is hopeful of targeted initiatives and policies for scaling-up the domestic solar manufacturing aligned to the 450 GW renewables by 2030 target as the Union Budget for the upcoming financial year 2021-22 is scheduled to be presented on February 1.

There is an immediate need to build a robust eco-system for indigenous solar manufacturing and make it cost-competitive to achieve the Government’s vision of Aatmanirbhar Bharat (self-reliant India).

India needs a comprehensive policy framework encompassing both tariff and non-tariff barriers, long-term financial support and direct incentives to make the domestic solar industry cost-competitive. 

The finance ministry should consider 5% interest subvention on term loan and working capital, upfront central financial assistance of 30% on CAPEX, and increase in the export incentive from 2% to 8% under Remission of Duties or Taxes on Export Product (RoDTEP), which will aid indigenous solar manufacturing.

The industry awaits the implementation of basic customs duty (BCD) with exemption to Special Economic Zone (SEZ) based solar manufacturers and the Production Linked Incentive (PLI) scheme. 

Bringing down Minimum Alternate Tax (MAT) for units operating in SEZs, extending Section 10 AA of Income Tax Act till March 31, 2022 for SEZ-based solar manufacturing unit, preferred interest rate support and priority lending support for manufacturing units, availability of National Clean Energy Fund (NCEF) for expanding solar R&D are critical to augment domestic solar manufacturing.

Additionally, the Government should consider implementing tariff barriers like basic customs duty, safeguard duty, and anti-dumping duty for at least 4-5 years. 

Offering a capital subsidy of 50% for setting up R&D and quality testing infrastructure within the manufacturing units will help build scale. Also, a 200% super-deduction for the R&D expenditure on new and clean solar technology development should be allowed. 

India already offers a 200% super-deduction for the R&D expenditure in emerging areas such as biotechnology, which has led to the rapid growth of Indian biotech and pharma companies.

Implementing these policy recommendations will encourage economic recovery amidst the pandemic and provide an enabling eco-system to make India the global manufacturing hub for solar.

Vikram Solar is a solar energy solutions provider company, specialising in PV module manufacturing and EPC solutions.

The views and opinions expressed in this article are the author’s own, and do not necessarily reflect those held by pv magazine.

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