Cabinet nod for ₹19,500-crore scheme to incentivise manufacturing of domestic solar cell modules

The aim is to reduce the industry’s reliance on China-made panels

The Union Cabinet on Wednesday cleared a ₹19,500-crore scheme to incentivise manufacturing of domestic solar cell modules to reduce the industry’s reliance on China-made panels. This is a follow-up to ₹4,500-crore tranche that was cleared in November 2020.

Bidders for projects would be given performance-linked incentives (PLI) to set up and run manufacturing facilities that will span the entire production cycle of modules from making the polysilicon cells, ingots, wafers and panels to assembling modules that are used to produce electricity.

The PLI will be disbursed to firms after they set up their manufacturing units and the money disbursed over five years.

Officials from the Ministry of New and Renewable Energy (MNRE), the nodal body charged with administering the programme, estimate manufacturing capacity worth 65,000 MW of fully and partially integrated, solar PV modules to be installed over five years. The bulk of the allocation, of nearly ₹12,000 crore, is to incentivise the setting up of integrated manufacturing facilities because there is no installed capacity in India to manufacture polysilicone and wafers (the raw material for solar panels).

This would bring in a direct investment of around ₹94,000 crore, directly employ about 1,95,000 and indirectly around 7,80,000 persons. It would save India close to ₹1.37 trillion in imports, they estimated.

India has committed, as part of its international climate commitments, to a target of installing 5,00,000 MW of electricity from non-fossil fuel-based sources by 2030 and this translates to 2,80,000 – 3,00,000 MW from solar electricity alone. “We would need nearly 30-35 GW (I GW = 1,000 MW) of modules. With these schemes we expect to have 70-80 GW of capacity which would take care of our domestic requirements as well as exports,” Indu Shekhar Chaturvedi, Secretary, MNRE, told reporters at a briefing following the Cabinet clearance.

”The much-awaited Cabinet approval of ₹19,500 crore towards the solar PV module production-linked incentive scheme is likely to go a long way in developing the supply chain for solar PV module manufacturing in India. The PLI benefits coupled with State incentives under the industrial policies of the State government, concessional/ deferral duty schemes in customs [such as project import and manufacturing and other operations in bonded warehouse regulations], etc would help in improving the IRR of the project and make Indian-manufactured solar PV modules competitive in the market,” Saurabh Agarwal, Tax Partner, EY India, said in a statement.