A sustainable manufacturing policy for the solar panel industry could help save USD 42 billion in forex outgo by 2030, according to a KPMG report and the Indian Solar Manufacturers’ Association (ISMA). The ISMA also called for continued government support to the sector which could lead to better energy security and job creation.
Noting that about 100 gigawatts of solar capacity would be established in the country by 2030, the KPMG report said, “If a sustainable domestic solar manufacturing is promoted, it can save US $ 42 billion in equipment imports by the turn of 2030”.
Currently, India imports more than US $ 30 billion of electronic goods, including solar panels, annually making it the fourth largest item in the import basket, contributing to 23 per cent of its trade deficit.
The report further noted that if local manufacturers are given tax and other incentives, the government would still be able to make a net benefit of US$ 1.1 billion over the next ten years due to employment and resultant tax gains. The report said that local manufacturing could also help create 50,000 direct jobs and over 1,25,000 indirect jobs over the next five years.
Noting that the national manufacturing policy recognises solar manufacturing to be of strategic importance, the KPMG report said that the solar manufacturing industry has been facing challenging times because of various factors including lack of a level-playing field and various global factors.
“The domestic solar manufacturing is competitive but suffers due to lack of incentives that are provided to solar manufacturers in other nations. As much as 40 per cent of domestic solar producers have shut down, with the industry utilisation at just 21 per cent,” ISMA president Ashwani Sehgal said.
He said that countries which have ambitious solar energy generation plans like China, the USA and Japan strongly support domestic manufacturing through incentives like loans at lower interest rates, credit guarantees, capital subsidies, tax holidays, anti-dumping measures as well as preferential domestic procurement, amongst others.
“While supporting domestic manufacturing could result in moderately higher price of solar power in the short run, the cost curve would fall in the medium term, as scale and supply chains develop,” KPMG’s renewable energy head Santosh Kamath said in the report.
“Concerns over unavailability of solar panels or sharp price rise can be allayed given that adequate capacities exist in South Korea, Japan, Mexico and Singapore. There is a cost difference of about five per cent to 10 per cent between the largest Chinese solar panel supplier and the largest Singaporean solar panel supplier, indicating availability of competitively priced imports,” the report said.
If local manufacturing is backed by reliable long-term demand on a level-playing field, there would be substantial investment by equipment producers. Some global players may also invest here to make the country an export base, the KPMG report said.