India’s Solar Ambitions: Is laissez-fare policy the only way to achieve it?

While Indian media was rejoicing at the “new dawn” in Indian democracy, the Anti Dumping Authority in the country was priming itself to impose an anti dumping duty on the solar cells imported from
the US, China, Taiwan and Malaysia.

In 2012, the domestic manufacturers of solar cells had alleged in their application to DGAD (directorate general of antidumping ) that the US, China, Malaysia and Taiwan were exporting solar cells and modules in India that were being sold at a fraction of the cost they were manufactured. DGAD, which is under the Ministry of Commerce launched the antidumping investigations in January 2013. The investigation report recently submitted to the Anti Dumping Authority confirms their allegation and recommends a duty of 11 to 81 US cents on solar cells imported from these countries.

The reason was, as the Indian manufacturers alleged, these manufacturers were enjoying heavy subsidies at home to produce solar cells. China has been especially singled out for its huge subsidy
driven industry. However, other three countries are also being clubbed for they have cornered a lot of business in India by edging out the local suppliers.

Ever since India embarked on its ambitious national solar programme –Jawaharlal Nehru National Solar Mission (JNNSM) – in 2010 with an aim to install 20,000 MW of grid connected solar power by 2022, the market in the country has expanded and become lucrative.

In the last three and a half years, the first phase of JNNSM has been completed and the first round of bidding for the second phase has already been done. As on date the total installed capacity in India
stands at 2,650MW and rising on a daily basis.

The JNNSM was one of the 8 missions India launched under the former Prime Minister, Dr Manmohan Singh, as country’s national action plan to deal with Climate Change. While presenting the National Solar
Mission it was imagined that the huge capacity addition will create a market for the development of a large pool of engineering and managerial professional as well as considerably enhanced production
capabilities.

However, this wasn’t achieved. The JNNSM was launched within one and a half years of global economic meltdown of 2008. The European nations were reeling under the impact of severely constrained economies and their renewable energy programmes were hit hard due to lack of funds. Many renewable energy companies went bankrupt or faced extreme financial stress. Inventory piled up and there was difficulty in maintaining the stocks.

In such a scenario, the Indian Solar Mission came as manna from heaven. While the Indian producers were looking for large quantities of solar cells and equipments, the European companies saw an opportunity to offload their piling inventory. Prices crashed and the arrangement served the purpose of both the parties.

It is true that the low cost imports from Europe contributed substantially in the rapid expansion of India’s installed solar capacity in the first phase of JNNSM. The cost of per unit of power that was in the range of Rs 17 (30 cents) came down to as low as Rs 7 (8 cents approximately) during the last lap of bidding in the first phase itself.

The domestic manufacturers found their products being edged out due to price difference. They lodged a complaint with the government of India and the latter took a quick decision to impose a clause called ‘DCR’ –Domestic Content Requirement. Under this clause 30 percent of the entire solar cell content would have to be sourced from the domestic manufacturers. The US promptly moved the World Trade Organisation (WTO) protesting this was protectionism on India’s part.

Back home in India the solar power producers found a novel way of circumventing the rule by shifting from solar PV to thin film. As thin film wasn’t being produced in India and also it was not under the purview of the DCR, there was no way the power producers were under any obligation to fulfill the required quota. However, this shift to thin film wasn’t good news for India as the technology is still considered suspect for long term efficiency in the Indian conditions.

Things changed for the worse when the European Union as well as the US imposed anti dumping duty on the Chinese solar cells as they found that the Chinese companies were being heavily subsidised at home and are enjoying unfair advantage over their competitors.

The sudden brakes on the exports to Europe and the US forced Chinese companies to further lower their costs and turn their attention towards another lucrative market – India.
The Indian solar power producers never had it so good. During the first phase they had over flowing inventory in Europe while now China was knocking at their door with their low cost stuff and ready to lower it further just to get rid of its monumental inventory.

From the point of view of the independent or private power producer who is bidding at the government office to set up a solar power plant and then produce and sell power to the government utility it s a
cracker of a deal. However, he is not the sole stakeholder of the solar industry universe.

As the guiding principles of JNNSM suggest the entire industry whether it’s manufacturing, selling, maintenance and research should grow only then the society and the economy would be able to internalise this new industry and reap its economic benefits.

Yet in the last four years, only the importers and the installers of power have benefitted from the opening up of the market. It is at the expense of the local manufacturers, researchers and other auxiliary
industries that act as support staff. There has been no investment in the research by the corporate and nominal by the government of India.

The power producers have their own logic which is rooted into the concept of profit maximisation. They insist that it was low cost solar cells that powered India’s quick rise in the solar installation game and it is this low cost model alone that stands an outside chance to fulfill the grand aim of installing 20000 MW of grid connected power.

On their part the domestic solar cell producers have made their mistakes too. They have not worked on any innovation to bring down their cost, neither on their resource management to improve their
bottom lines or improve their product quality or design. A large section of the manufacturers want to keep producing what they have been without any change and insist the government keep shielding them from outside competition.

On the face of it, if we employ the Laissez-fare policy on the sector and just keep our eyes on the aim of achieving the installation target at the minimum cost, then the logic of the power producers holds true. The errant or laggard manufacturers be damned.

However, it doesn’t work this way when a whole new industry is emerging as a mainstay and will be here for a long time to come. There is truth in the assertion of the manufacturers that they don’t have
financial muscle to make costly technological transitions. But the government- run public sector undertakings like the Engineers India Limited (EIL) can seek loans for innovation and also invest in research.

The government policies should be holistic and during initial years they should be more actively involved in the development of the market. Once it reaches a critical mass and achieves some maturity
where a sizeable number of stakeholders can hold on their own to a hard knock or two, then it’s time for the “big brother” to retreat.

In this regard, imposing anti dumping duty is a right step for the time being but not the only remedy for all times to come. The government should be more creative in its pursuit to make solar popular. It
should offer tax exemptions or holidays for installing new production lines. Help in innovation and also create a budget for research in the technical universities and make arrangement for quick transfer of
technology from the lab to the assembly line.

If the government can take such action only then it will help the sector. Otherwise anti dumping and DCRs will be seen as brute protectionism that will allow only the slothful companies to keep extending their slothful behaviour for some time more.

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About indiadynamic

mediaperson worked for TWI, TVI, Dainik Bhaskar, UTV and Hindustan Times in all the divisions print, TV, radio and internet
This entry was posted in Sustainability, Sustainable development, Uncategorized and tagged , , , , , , , , . Bookmark the permalink.

2 Responses to India’s Solar Ambitions: Is laissez-fare policy the only way to achieve it?

  1. Subir Dhar says:

    Hi,

    Thanks for sharing your views is a lucid manner..!

    Obama Gov has set a goal that the US Solar Cell makers achieve a price point of 50 cents a watt.. and they have come close. Given that am wondering how the Anti Dumping duty has been worked out at 11 to 81 cents per watt. Never know that there may be vested interested pushing forward the case of applying dumping duty.

    On your point of giving subsidies/support to EIL (never knew that they have any expertise in Solar) – believe that they can deliver to meet the pricing or the timeline. Maybe Gov can source the technology from US/EU labs and license to the Indian makers – that maybe a faster way to achieve the targets!

    • indiadynamic says:

      Hi Subir thanks for sharing your views. I think your point is valid in terms of sharing technology. However, our past record suggest when we go for tehc transfer we get stuck in a particular technology and don’t innovate. So the better thing would be to have technology collaborations as you suggest as a short term goal to bridge the technology gap but simultaneously fund research programmes in our technical institutions too. This way a healthy balance would be achieved in our long and short term goals.

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