Solar manufacturers request early allocation of INR 19,500 crore boost to PLI Scheme

The Union Budget allocates an additional INR 19,500 crore to the production-linked incentive (PLI) for solar manufacturing as the Indian government seeks to facilitate energy security through domestic manufacturing and India’s global commitment of 450 GW of RE by 2030 (which entails an installed solar capacity of 280 GW). The scheme, the best-of-its-kind non-tariff measure globally, was initially allocated INR 4,500 crore in November 2020. Bids were invited last year that saw an overwhelming response of 52 GW with a demand for INR 23,000 crore. The scheme incentivizes the best technology, the extent of localization, and level of integration to ensure that the panels produced are at par with the best in the world and give a fillip to the PV deployment in the country.

To encourage domestic supply source to the solar industry, which is 85% dependent on imports, basic customs duties (BCD) of 40% on import of solar modules and 25% on cells were announced last year. The duties are set to become effective from April this year. To ensure that only domestically produced and certified high-quality modules are used, the Ministry of New and Renewable Energy (MNRE) has also strengthened the ALMM order through its circular on January 13, 2022. The ALMM certified capacity as of December end last year stood at 11.2 GW with 41 approved manufacturers. Industry sources reveal that further applications for 6 GW have been made last month.

Large project developers are comfortable in sourcing for the near term but are worried about the ramping up of domestic manufacturing capacity to keep pace with the annual deployment of 30 GW, once all tenders/ PPAs under bidding (32 GW) are awarded and several schemes/ previous contracts under various stages of implementation (50 GW) shift to on-ground execution. 

The MNRE had clearly stated after evaluation of bids, if the solar PLI allocation was enhanced to INR 24,000 crore, manufacturing commitment under the scheme can be around 55 GW. The MNRE, through the Indian Renewable Energy Development Agency Limited (IREDA), the nodal agency for solar PLI implementation, had shortlisted three beneficiaries (Reliance New Energy Solar, Shirdi Sai Electricals, and Adani Infrastructure) in December, based on the initial allocation of INR 4,500 crore, against cumulative commitments for setting up 12 GW manufacturing capacities under the Solar PLI scheme.

Eighteen eligible PLI bids were received, out of which 15 are still in the fray. It is clear from among these, twelve companies, including Coal India, Waaree Energies, First Solar, Vikram Solar, Premier Energies, Emmvee, Larsen and Toubro, Megha Engineering, Tata Power Solar, ReNew Solar, Avaada, and Acme, can now be easily accommodated in the scheme. The scheme inherently facilitates bucketing or waitlisting to ensure that maximum capacity comes up on the ground. Thanks to the higher allocation, the total outgo after provisioning for the entire capacity of 48.6 GW committed by these 15 players is INR 21,600 crores, lower than the total pool of INR 24,000 crore.

All stakeholders are expecting IREDA, which has been capitalized recently, to expedite and issue letters of award to balance companies that have bid under the PLI scheme. Most players have already acquired land and some have even done the land development work and basic construction in anticipation of the award pending for the last three months. 

Sources state that if the confirmation is communicated to the Bidders, they can move with speed on ordering equipment and commissioning the plants in the next 12-18 months, allaying the fear of supply not keeping pace with demand. Some are even confident of leveraging the global scenario where most countries are looking at deleveraging their dependence on China and developing a credible second supply chain by supplying to export markets like the USA while the domestic demand ramps up to 30 GW per annum.