Union Budget 2021: Local solar manufacturers unhappy with Budget

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February 3, 2021 1:55 AM

Union Budget 2021 India: Acknowledging that solar energy has a “huge promise” for India, finance minister Nirmala Sitharaman had said in her Budget speech that “to build up domestic capacity, we will notify a phased manufacturing plan for solar cells and solar panels”. About 50% the country’s 11 GW domestic solar panel capacity and another 3 GW of cell-manufacturing facilities still remain unutilised.

In a market where technology changes very frequently, lower returns have prevented most of the local manufacturers to invest much in research and development for offering upgraded products to meet global standards.In a market where technology changes very frequently, lower returns have prevented most of the local manufacturers to invest much in research and development for offering upgraded products to meet global standards.

Indian Union Budget 2021-22: The long-standing demand by domestic manufacturers to impose a basic customs duty on imported solar panels was not met by the government in the FY22 Budget, leading to disappointment in the sector. Owing to cheaper rates of imported modules, especially from China, solar capacity addition is majorly done through imported products, and domestic panel makers had hoped for fresh import restrictions to boost the industry.

Acknowledging that solar energy has a “huge promise” for India, finance minister Nirmala Sitharaman had said in her Budget speech that “to build up domestic capacity, we will notify a phased manufacturing plan for solar cells and solar panels”. About 50% the country’s 11 GW domestic solar panel capacity and another 3 GW of cell-manufacturing facilities still remain unutilised.

“We eagerly await the detailed plan on the phased manufacturing plan for solar cells and solar panels, announced by the finance minister to scale-up domestic capacity,” Gyanesh Chaudhary, MD, Vikram Solar, said. “However, the renewable energy industry and especially the solar industry was hoping for more elaborate support from the Budget on implementation of BCD with exemption for SEZ-based manufacturers,” Chaudhary added.

Due to Covid restrictions, solar imports in April-November 2020 was $277 million, 80% lower than the imports a year ago. However, the pace of solar capacity addition has also dwindled to 2,100 MW in April-November, down 52% annually. The Centre had imposed a 25% safeguard duty on solar imports from China and Malaysia in July 2018 for two years (it has just been extended for another year to July 2021, at a rate of 15%) and the impost has helped only a handful of domestic module manufacturers (Adani, Waaree and Vikram Solar) increase their market shares.

In a market where technology changes very frequently, lower returns have prevented most of the local manufacturers to invest much in research and development for offering upgraded products to meet global standards. The budget had raised import duty on solar invertors from 5% to 20%, and on solar lanterns from 5% to 15%. “The increase in duty on solar inverters will have a limited impact, as the inverters account for only 5-10% of the overall project cost,” Manish Gupta, senior director, Crisil Ratings, noted.

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