Proposed policy to push solar UMPPs of 3,000 MW & above

Sops may include capital, interest subsidies & customs duty relief

The Department of Industrial Policy and Promotion (DIPP) has proposed a policy replete with incentives for ultra mega solar power projects (UMSPPs) of 3,000 MW and above. According to official sources, the sops could include capital and interest subsidies, greater incentives for R&D, and excise and customs duty relief for capital equipment.

The idea of DIPP (the nodal agency for the Modi government’s Make-in-India initiative) is to help the development of local industry for manufacture of solar modules/cells so that large solar projects can source inputs from it at competitive prices. The government would also endeavour to make the required land available to solar developers at ‘fair’ prices.

An UMSPP, under the current policy (Jawaharlal Nehru National Solar Mission or JNNSM), is defined “as a single power project with capacity of 500 MW or more”.

The feasibility of DIPP’s proposal is now being considered by an inter-ministerial committee comprising the DIPP and the ministries of new & renewable energy, power and finance, the sources added. Since the banking sector is not well-equipped to handle such large projects (as they are already saddled with huge bad loans and huge exposure to infrastructure projects), discussions will soon be held to see how India can attract foreign direct investment (FDI) and other sources of finance into its solar cell/module manufacturing sector. Up to 100% FDI via the automatic route is currently allowed in the renewable energy sector.

Currently, the costs of Indian solar modules are 25-30% higher than the imported ones. Technology, quality and delivery skills too are inferior to foreign competitors. Lack of demand, in turn, is preventing local companies from setting/scaling up plants in India to manufacture solar modules/cells. It is reckoned that plants with capacity of 3,000 MW would create the demand required for a local equipment manufacturing industry to flourish.

Over 70% of the country’s solar projects are currently set up on imported cells/modules. Solar panel imports (in volume) from China accounted for 63% of the 3.02 crore imported panels in April-May FY16, 70% of the 16.15 crore imported panels in FY15 and 65% of the 15.41 crore imported panels in FY14. Malaysia, Singapore, Taiwan, the US, Germany, Italy and Japan are also among other big exporters of solar panels to India.

The Union cabinet had in June cleared a proposal to ensure an increase in the country’s solar power capacity target to 1 lakh MW by 2022 (of which 60% would be from medium and large projects and 40% from roof-top installations) from the earlier target of 20,000 MW. The move will need investments worth Rs 6 lakh crore.

Therefore, there is a need for a comprehensive policy for UMSPPs of 3,000 MW and above, the DIPP said, adding that such huge projects can also help in bringing down the solar power cost significantly. However, issues including whether or not a significant number of homegrown companies have the experience, technical expertise, technology and financial resources to win bids for such huge projects will also have to be looked into, it said.

This development comes at a time when New Delhi has received an interim report from the World Trade Organisation’s Dispute Settlement Body (DSB), which according to sources, has gone in favour of the US in a dispute with India over the latter’s national solar policy (JNNSM). The local content requirement in the policy, the US had alleged, violated the ‘national treatment’ principle in WTO rules, according to which equal treatment should be provided by member countries to foreign and local players.

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