Solar Power Made in India – latest measures taken by the Indian Government

published on 20th August 2021

Due to the disruption of supply chains, lockdowns and the general economic standstill as a result of the coronavirus pandemic, the Indian government has given its „Make in India” programme a sharper focus and expanded it to include the „Self-Reliance India” programme. In the renewable energy sector, the results of these efforts can be particularly seen in the photovoltaic market, which continues to be dominated by cheap imports from abroad. In order to become more autonomous in this market, the Indian government bets on higher import duties for imports from abroad and on sector-specific subsidies for domestic manufacturers.

Increased import duties

Following multiple announcements by the Indian government to increase the customs duty on photovoltaic products, the rates will increase to 40 % for solar modules and 25 % for solar cells effective 1 April 2022. This increased customs duty will replace the previous 15 % safeguard duty that India currently imposes on imports from China and Malaysia. The introduction of this increased duty will not be phased and there will be no grandfathering for ongoing or already tendered projects. Consequently, companies wanting to continue importing solar modules and solar cells must already plan for the increased import duties on current and future projects.

The significant increase in the customs duty aims to help promote local manufacturing and reduce cheap imports from abroad, especially from China.

Subsidies for manufacturing companies

In order to additionally stimulate local manufacturing, the Indian government has launched various subsidy programmes for manufacturing companies, especially in the area of renewable energy. This includes the so-called Production Linked Incentive Scheme „National Programme on High Efficiency Solar PV Modules” („PLI”), which offers subsidies for photovoltaic module manufacturers. PLI subsidies are awarded through a bidding process that takes into account various parameters such as production capacity and scale, minimum module output and sales volume. The more parameters a company fulfils, the better its chances to win the subsidy programme. Under the PIL, a total of INR 45 billion is to be doled out to companies in subsidies. The deadline for submitting the subsidy application was 30 June 2021, although it is expected that it will be extended beyond that date.

Conclusion

The Indian government is striving to become more autonomous, especially in renewable energy and the photovoltaic market, and to eliminate its reliance on imports from abroad. To that end, it is creating more incentives to boost domestic manufacturing, on the one hand, and, on the other hand, it intends to use the high customs duties to make imports from abroad unprofitable. German companies should position themselves in the Indian market now and use the advantages of India's market policy in a strategic way.