The Indian government has proposed a number of initiatives to encourage domestic solar manufacturing. In April of this year, the United Cabinet approved a production-related incentive (PLI) plan to promote the manufacture of gigawatt-level high-efficiency solar photovoltaic (PV) modules with an expenditure of 45 billion rupees (about 605 million US dollars). The prevailing view is that the plan is suitable for larger investors and will not help smaller manufacturers.

The plan was originally intended to alleviate future disruptions in the global supply chain by establishing a strong domestic solar manufacturing ecosystem. But now, the same supply chain disruption is limiting the growth of domestic industries.

Local manufacturers are working hard to bridge the gap between supply and demand and control the rise in commodity and component prices. Disruptions will have a greater negative impact on small manufacturers who lack the advantages of scale.

Raw material prices affect the solar supply chain

For a long time, the solar energy supply chain has been dominated by Chinese companies. But now, the situation is changing, and many domestic companies are seeking to expand their production lines. However, smaller manufacturers in particular face many challenges.

When talking about the plight of domestic manufacturers, Pramod Sirohiya, managing director of Senza Solar, said: “Many problems are emerging in the manufacturing industry. The increase in freight is one such problem. The cost has risen from US$800 (~59,314 rupees) per container to 9,000 US dollars (~667,288 rupees) is not expected to decline anytime soon. The shortage of containers is another problem, which creates problems for importing raw materials from China."

Sirohiya also expressed concern about the increase in raw material prices in the past six months. "In the past three months, the cost of aluminum profiles has risen by 30-40%. The prices of silicon wafers and EVA sheets have also risen by 40-50%."

Battery manufacturing may pick up soon

It is estimated that solar installations will exceed 30 GW in the next 2-3 years, so the demand for a strong solar supply chain is crucial. India still has no wafer manufacturing capacity. Most of the raw materials-wafers, ingots, aluminum and copper are imported from China.

Given the dependence on imported raw materials, many people think that Indian manufacturers are just assemblers. Government measures failed to promote the localization process of domestic manufacturing. In addition to policy and regulatory obstacles, economic and technological risks also hinder the development of the solar manufacturing ecosystem.

Bharat Bhut, co-founder and director of Goldi Solar, talked about domestic manufacturing capabilities and the future. He said: “Many companies in India are planning battery manufacturing. It takes about a year to develop a capacity of 5-8 GW in the country. From the battery It takes time to integrate backwards from wafers to polysilicon. Currently, the raw materials required for solar cell production lines are silicon wafers, silver and aluminum paste. Since we don’t have an internal ecosystem, we are purchasing silver paste and wafers from outside."

According to Bhut, although large companies are expanding, medium-sized companies are unable to do so because technology upgrades require capital. "You have to constantly change equipment with changing technologies. The PLI program is a good move at the macro level, and larger participants will benefit from it. It will create a much-needed polysilicon module manufacturing ecosystem in the country."

He emphasized that Indian module manufacturers have the ability to meet domestic demand, and said that domestic developers can rely on Indian manufacturers to provide modules. "Despite the disruption in the supply chain, the module manufacturing business is performing well. We are now only assemblers, and this has been the case for the past ten years."

He said that it is a need for the central and state policies to be consistent.

Harsh Jain, director of Citizen Solar, shared a similar view. He said: “The implementation of the PLI plan will provide a huge impetus to the manufacturing ecosystem. It is possible that large companies such as Jupiter Solar and Goldi Solar are planning to expand their production lines. We have a strong production base within three years. Module prices have been on the rise in the past six months. In terms of raw materials, we are completely dependent on China. The prices of glass, junction boxes, aluminum, and copper have been rising, and there is no sign of abating."

"Currently, EPC company purchases modules at 21 rupees (~$0.28)/W (poly) and 23 rupees (~$0.31)/W (monochrome). About six months ago it was close to 18 rupees (~$0.24)/Wp The price of modules has risen by 25% in the past six months. The price of solar cells has begun to fall, but it will take some time to return to normal. The price of solar cells has dropped from US$0.55 (~40.73 rupees)/cell to US$0.51 ( ~37.77 rupees)/battery, but still at a high level," he added.

Need a responsibility framework in place

Domestic module manufacturing may be mature, but the supply of raw materials is still worrying. Stakeholders believe that a competitive tariff system needs to be implemented to provide domestic manufacturers with a level playing field to compete with cheap imported products. Manufacturers hope to impose basic tariffs (BCD) next year.

"Battery manufacturers are getting wafers from China. If we have wafer manufacturing capabilities in India, we will need silicon ingots, and if we start manufacturing silicon ingots, we will have to start manufacturing polysilicon. This is how the supply chain works. Now, we have to start from scratch. At present, we don’t levy taxes on modules, but we have to levy taxes on raw materials, which is unfair to domestic manufacturers. Module manufacturers are facing big problems. CEO and Managing Director of RenewSys India Avinash Hiranandani said that the price of raw materials has soared and the transportation cost per container has also increased to US$9,000 (approximately 667,288 rupees).

"If BCD is not implemented next year, everything will fall apart. Domestic manufacturers must be protected. ALMM (list of approved models and manufacturers) has not been fully implemented either. We can hope in life. If they do not implement BCD next year, That would be a huge blow," Hiranandani added.

Jain emphasized the need to abolish anti-dumping duties on raw materials imported from China, “Due to rising solar cell prices, many module manufacturers have reduced their production capacity. We have reduced production capacity to 15,000 modules per month, and many leading manufacturers have done the same. A big obstacle is the levy of anti-dumping duties on raw materials and no anti-dumping duties on finished solar panels. There is no reason behind this decision. The government should also seriously consider abolishing anti-dumping duties on raw materials. This will help everyone. "

In order to compete globally, India needs to focus on developing local technologies. Currently, none of the solar energy technologies on the market have been developed in India.

A module manufacturer said, “We only focus on China’s technology for more than three years. With the Chinese people updating technology every three or four years, Indian companies will face a big problem. If Indian companies want to compete with China, they must come up with Own technology, otherwise you will have to purchase the entire production line, manufacturing process and raw materials every five years."

Regarding the necessity of cooperating with universities and government laboratories, Jain emphasized that we should conduct technical cooperation with leading domestic universities. Only in this way can we compete with technological innovation in the global solar field.

"Chinese manufacturers have already started supplying 550 Wp modules. In India, we need some time to start producing 550 Wp modules. Technology upgrades cannot happen overnight, it takes time. In order to compete with the latest technology, we need to cooperate with government laboratories and universities; Only in this way can there be real technological development. Currently, we do not have any such arrangements. But I think things are moving in the right direction. In the next two to three years, we will have a manufacturing capacity of 75 GW per year. This is not far-fetched. The certification system is also flawed. Here, we do not have a certification system for solar cells, but we have a certification system for modules, which fully illustrates our country’s approach," Jain added.

Rakesh is a reporter for Mercom India. Before joining Mercom, he worked in various roles such as business reporter, assistant editor, senior content writer and associate editor at bcfocus.com, CIOReview/Silicon India, Verbinden Communication and Bangalore Bias. Rakesh holds a bachelor's degree in English from Indira Gandhi National Open University (IGNOU). More articles from Rakesh Ranjan.