To achieve the ambitious target of establishing 100 gigawatts of solar capacity by 2022 in the country, the government is likely to announce incentives in the upcoming Budget to boost manufacturing of solar panels.
Despite a rapid increase in generation, solar power equipment are either assembled, or imported from China and Taiwan. Top government sources said finance minister Arun Jaitley in his Budget speech on February 29 is likely to announce incentives such as viability gap funding (VGF) to aid setting up of manufacturing centres, and commitment to long-term purchase agreements of said equipment.
The VGF is a grant to support projects that can be economically justified, but do not entail financial viability.
“Now is the time to boost manufacturing given the tremendous capacity generation in the solar power sector, which we will see from 2017 onwards. This is a welcome move,” said Deepak Puri, CMD of Moser Baer India Ltd, a solar equipment manufacturer.
Fiscal stimulus such tax holidays to make production of solar equipment attractive is also likely to be part of the Budget, sources added.
India’s solar power capacity stands at a little over 5,100 megawatts and is likely to double in the next couple of years. The government’s solar power policy directs states to enter into long-term power purchase agreements (PPA) with solar power developers, but most have not followed the directive. A commitment from the central government to get these agreements signed will incentivise manufacturing in the sector.
“Implementation is key for such incentives from the Budget. The demand for equipment is very high, and these incentives will offset the high cost of manufacturing,” said Sujoy Ghosh, the country head of First Solar India, a US-based solar power developer .
While Chinese companies are making a beeline to tap into India’s growing renewable sector, the Budget incentives are directed to boost indigenous manufacturing with an eye on exporting equipment in the near future.