Make in India and its impact on solar power

Prime Minister Modi launched the Make in India program in September 2014 as part of a larger set of nation-building initiatives. It was devised to transform India into a global design and manufacturing hub. India’s power generation has struggled to keep pace with its rapid economic growth, rise in population, and rampant urbanization. Despite an installed capacity of over 260 GW, energy demand has always surpassed supply by a wide margin, and with the 12th Five Year Plan (2012-17) that targets an annual GDP growth of 7-8%, there has to be a considerable increment in energy supply to keep up with the ever-increasing requirement.

There has to be a substantial expansion in energy infrastructure, whereby solar energy in India can continue to be a key driving force of its economic policy. Though presently both wind and solar technologies are manufactured in India, the former is better established with a capacity of over 10 GW, while solar manufacturing has only about 800 MW on offer. As the country gears up to raise its renewable energy capacity, it is imperative to recognize the need for a skilled workforce. The current population growth is such that India needs to create 10 million new jobs every year. However, although the renewable energy sector promises to a high potential to create new jobs, it also brings with it the need for skilling, which is not only urgent but also alarmingly unmet.

As India hosted the first Make in India Week, focusing on increasing domestic manufacturing in India, Piyush Goyal, the minister for power, coal, and new and renewable energy, spoke about how the country needs to have end-to-end solar manufacturing. To fructify the national renewable energy projects, there has to be recognition of the importance of strengthening domestic manufacturing. Goyal has promised that in the 18 months, solar manufacturing in India was likely to get significantly cheaper. The objectives of the Make In India initiative can be furthered only by strengthening domestic manufacturing of solar panels and wind turbines, at competitive prices. Besides, it will also provide an impetus to the solar and wind industry.

It is high time for a transition to an energy future in which renewable energy is a significant component. The best part is the immense political support that is being extended to this sector. With access to high-quality and relevant training programmes, coupled with the support to the domestic solar and wind manufacturing market, it can be expected that the synergies have finally been identified, which will go a long way in determining the pace of the renewable energy scale-up in India. As a part of one of the fastest growing conglomerates in the country, Welspun Renewables is invested in a sector whose potential return on investment is expected to be one of the highest under the Make in India regime.

GST- How will the renewable sector deal with it?

India has been increasingly focusing on renewable energy, which has garnered considerable global interest; however, according to latest findings, there is a high probability that the new GST (Goods and Services Tax Bill) regime will raise the cost of setting up renewable energy projects in the country by up to 20%. It has been learnt that the Ministry of New & Renewable Energy (MNRE) will share the findings of the report with the Department of Revenue, requesting an exemption. The study commissioned by the ministry compiles findings that lead to the revelation that the implementation of the GST will increase the cost of setting up of all categories of renewable energy systems, be it solar, wind, or biomass, or even small hydro power projects.

The draft findings, which have been reviewed by Economic Times, serve to show that the cost of Solar PV-Grid could rise by 12-16% and that of Off-Grid systems by 16-20%. Wind energy systems could face an increase of 11-15% in tariff/cost of setting up and operations, and given that it is already going through a dull phase, this drastic increase will not bode well for it at all. Besides, the hybrid and solar combination projects will, in all likelihood, face an increase of 11-17%. The major factors that will lead to an adverse impact on the cost of renewable energy include removal of exemption, increase in tax rates, and removal of statutory norms. The ministry has put forward its argument that a sudden increase in cost would result in policy disruption, scare away new investors, and also make it difficult to retain existing investors.

100% tax holiday on the earnings for 10 years, concessional excise and custom duties, are some of the various fiscal incentives that the renewable energy sector currently enjoys. However, in the new GST regime, all these incentives will come to an end. With over $4 billion lined up for investments in India’s solar industry, its viability depends largely on exemptions continuing on related equipment to power 4.8 GW of electricity generation. Service tax is also likely to increase to 18%, thus leading to a 5% rise in operation and maintenance charges. Developers are keeping their fingers crossed, with the hope that a standard GST rate will not be taken into consideration for projects that have bid at high tariffs. Indian renewable energy development has to be given a big boost in order to meet the targets of the Government by the end of the decade. 

Solar Power in India-A new beginning in 2016

June 2015 saw Prime Minister Narendra Modi revising India’s solar power target from 20,000 MW to 100,000 MW by 2022. India currently has a total of 5547 MW grid-connected solar energy projects. Estimates reveal that India requires Rs. 6 trillion to escalate the capacity to 100GW. Recently, the Ministry of New and Renewable Energy said that India will add 3790 MW of solar power capacity by March 31,2016 to take the total installed capacity in India to 9038 MW. The Ministry submitted a status report that lays out the implementation of various schemes which will enable the meeting of the target by 2022. According to the Ministry’s statement, till January 31, a total of 5248.21 MW has been installed, with the maximum capacity being in Rajasthan and Gujarat coming a close second.

Of the new capacity that will be added by the end of this year, 322 MW will be added in Rajasthan, 281 MW in Telangana, and 276 MW in Tamil Nadu. The report also stated that tenders have been prepared till January 1 to add 15,177 MW of solar capacity in 2016-17. Tenders for another 4431 MW of projects are also expected to be ready by the end of the current fiscal year. If the projects reach fructification, by April 1, 2017, India’s solar power generation capacity will stand at 21,199 MW. Raj Prabhu, CEO and Founder of the Mercom Capital Group, was recently quoted saying that the sector of solar power in India has finally emerged out from a state of hibernation. The proof of it can be found in the fact that after three years of remaining at a stagnant level, solar installations in 2015 increased by 142% and 2016 and 2017 are expected to witness further growth in this regard.

Welspun Energy Pvt. Ltd (WEPL) is a leading independent developer of renewable energy projects. Within this year the organization will have achieved 1 GW of solar and wind commissioned capacities. ABB in India and Welspun Energy have together installed about 700 MW of solar photovoltaic projects in numerous Indian states like Punjab, Rajasthan, Gujarat, Maharashtra, Karnataka, and Tamil Nadu. The company also plans to participate in government’s program of setting up 4000 MW solar ultra mega power projects. The pipeline of state level projects that are to be commissioned through 2016 looks strong, and in the first quarter of 2017 will expectedly witness a significant capacity of addition through central government allocations. With Tamil Nadu, Andhra Pradesh, Telangana, and Karnataka contributing almost 80% of all new capacity addition in calendar year 2016, the utility scale solar market seems to be well on its way to meet the target for the next financial year.