Domestic Solar Panel Makers Seek Original Supply Curb From April 1

The local solar panel manufacturers want the government to reintroduce the original 2019 order on the supply curb as the deadline for approved lists of modules and manufacturers approaches closer.

This is because there is a lack of clarity as to whether the relaxations proposed under the Feb. 9 circular for projects in the advanced stages of construction would apply or not. It is creating confusion in the minds of the project developers as well as the domestic manufacturers.

The Ministry of New and Renewable Energy had on Feb. 15 put in abeyance until further notice the Feb. 9 circular that exempted projects in advance stages of construction and where orders for equipment were placed before March 31, 2024. It also exempted open access projects and captive and group captive projects from ALMM.

Domestic manufacturers are worried about their extended losses as they have lost their market share in the last year since ALMM was suspended and believe exemptions would allow developers to order for projects for up to one year starting in March. They expect the government to impose the original 2019 order on ALMM instead of going ahead with the relaxations given under the Feb. 9 circular.

The project developers, on the other hand, are unsure if the benefits will continue or not, as they will be forced to buy costly domestic products if the ALMM gets reimposed on April 1. Developers find imports to be cheaper compared to domestic panels, despite a 40% customs duty on panel imports from China.

It is a catch-22 situation for the government that wants to promote Atmanirbhta while also having the 2030 target of meeting the 280 GW solar capacity at the back of its mind.

The situation currently is that India doesn’t have enough operational production capacity for solar panels to meet the rising demand.

India can produce around 12 GW at present, and the approved capacity under ALMM is 20 GW, while India will need around 30 GW annually to reach its 2030 target, according to the Ministry of New and Renewable Energy.

The remainder of the 8 GW that were approved are under various stages of commissioning and will take between 6 and 12 months before they are ready.

There are another 20 GW of applications pending before the authorities for approval under ALMM. Once approved, this will give the required boost to the domestic manufacturing capacity.

However, commissioning takes close to 18 months, depending on whether it’s a module plant or an integrated plant with cells and wafers combined.

Until India reaches that capacity, the pull and push from both manufacturers and developers will continue.

According to domestic manufacturers that NDTV Profit spoke to, the abeyance of ALMM has led to the dumping of cheap Chinese panels in the country, leading to a loss of market share for them. If the delay in its original form continues, it will offset the Atmanirbharta mission and hold back investments, officials said.

Around 18 GW of solar panels were imported in India in the last year, while real progress happened on just 7.5 GW, according to one manufacturer who spoke on condition of anonymity.

During the initial six months of FY24, India saw a surge in solar module imports, reaching a substantial $1.13 billion. This surpassed the total PV panel imports for the entire FY23, which amounted to $943.53 million, according to Eninrac Consulting.

“When ALMM gets reimposed, we will easily regain the 70–75% market share from 30–35% at present,” he said.

Even if ALMM becomes effective with certain conditions, like exemption for projects under construction before March 31, and where orders have been placed, these will be subject to verifications to ensure compliance with the laid-down criteria.

“This will come as a mega boost for the domestic manufacturers of solar modules. The operating margin for domestic manufacturers will be around 12–14% in FY24, with a strong contribution from exports, and this will continue in FY25 if ALMM is reimposed," he said.

In 2023–24 (till December 2023), Indian companies exported 2.87 GW of modules to the US alone. Exports are a major component for domestic manufacturers to keep themselves afloat when competing with cheap Chinese panels.

Panel prices have dropped by over 50% in the last year due to overproduction and supply gluts.

Tanmoy Duari, chief executive officer of Axitec India, a German company starting panel manufacturing in India, believes that in order to create a balance between developer and domestic manufacturer demand, the government may allow certain relaxations to the developers while imposing ALMM from April 1. That can be a win-win for both parties.