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Budget 2014: Will a solar dawn make a manufacturing boom?

According to reports, the BJP election manifesto has laid great emphasis on both skilled job creation and the promotion of solar energy. Gujarat already leads the country in installed solar capacity, and under Narendra Modi’s leadership, India’s commitment to solar energy is set to scale great heights. Several large projects have been announced by various states, but the largest single initiative is 20,000 MW in the JNSM, of which 2,000 MW has been installed.

At a “rule of thumb” figure of Rs 7.5 crore per MW, the overall outlay is a huge Rs 1,50,000 crore for this initiative alone. The ministry of finance is now set to determine if the solar cells and modules needed to produce this power will be manufactured in India or if these will come from China and other countries.

Should this Rs 1,50,000 crore, much of it government subsidy, be spent in India, helping to light the homes of tens of thousands of Indian workers, generating a skilled workforce and promoting entrepreneurship in India? Or should it go straight to foreign suppliers, with no benefit whatsoever to the Indian manufacturing sector, relegating India to a trading nation in such a vital part of our industry? Indian-made solar modules are now being exported to Japanese and German customers, who are amongst the most demanding in the world.

Many of these modules use Indian-made world standard solar cells and solar glass. It’s a pity that the dumped prices in India prevent sale of these modules in India.

Sadly, several other Indian companies with absolutely modern, state-ofthe-art manufacturing facilities have been forced to suspend production and lay off workers in the face of ferocious dumping by various countries, including China and the US.

It is estimated that nearly 25,000 skilled workers employed in this industry have been rendered without work, and loans of nearly Rs 7,500 crore made by public sector banks are at risk of being declared non-performing assets. Indian solar components and module manufacturers came together and applied for imposition of anti-dumping duties under the aegis of the Indian Solar Manufacturers’ Association on January 19, 2012.

In the biggest investigation ever handled by the ministry of commerce, government officers dealt with over 18,000 pages of representations, conducted a very large public hearing where all sides were heard, and undertook trips to foreign manufacturers whose dumping was being investigated. The commerce ministry then issued its findings, recommending imposition of anti-dumping duties.

Ministry officials have come across instances of over-invoicing of supplies by foreign suppliers. This also needs to be investigated to see if this is violating any laws.

Some solar developers opposed to the imposition of these duties have been vigorously pursuing two fallacies. First, that the higher initial cost of using domestically produced cells and modules will make solar power unaffordable. The difference of about Rs 53 lakh per MW translates to an additional funding of Rs 10,600 crore between now and 2020. In contrast, the additional foreign exchange outflow will be Rs 81,400 crore, or nearly $14 billion, over the same period.

Second, that the cost of power will become unaffordable. The impact on cost of total power as per India’s energy mix will be insignificant: 1-3 paise per kWh. Both these costs will be much more than offset by the economic boost generated by the spending of Rs 1,50,000 crore within the Indian economy.

Significantly, despite such a large consumption of solar modules on the cards, there is no proposal for manufacturing in India from a single international solar manufacturer of repute. This, because it is just unaffordable to produce here.

The promise of a holistic vision under the new leadership has filled us with great hope. Here is a golden opportunity to revive the solar manufacturing industry. This will lead to much employment and domestic generation of skills.

Here’s to hoping that the ministry of finance promptly accepts the recommendation for imposition of an antidumping duty made by the ministry of commerce, so that Indian manufacturers have a level playing field.

By Pradeep Kheruka, The writer is member, Indian Solar Manufacturers’ Association

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