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Renew | July 2014

The heat is on!

The Indian solar manufacturing sector is at a critical stage now. The consolidation of the sector has already taken place globally, and going forward, India is not going to be immune to the trend. The future growth of the Indian solar sector will depend a lot on the outcome of the anti-dumping investigations and the effectiveness of the domestic content requirement clause.

The question that arises now is what has gone wrong with Indian solar manufacturers? It is rather surprising to know that the manufacturing capacity and capabilities of Indian makers were at par with China a decade ago, and the Indian solar manufactures saw a dip in fortunes only over the last five years.

The story unfolds
Power Today found out from a reliable source in the Ministry of New and Renewable Energy that none of the solar manufacturing companies are vertically integrated. Solar photovoltaic manufacturing (PV) is mostly concentrated at the downstream of the module assembly. ´Some of the module manufacturers also make cells. But there is hardly any upstream presence,´ said the source from the MNRE.

The reality is a far cry away from the myth created by Indian manufacturers. Those who are cursing the Government for the current scenario, are deliberately shying away from the truth that India never had a manufacturing capability of solar PV and the country has remained an assembly point. Experts in the industry who are closely associated with the development on anti-dumping and domestic content requirement (DCR) feel that most of the manufacturers lack economies of scale.

With manufacturers in the European and US markets started declaring bankruptcy themselves, this had a direct impact on India´s solar ´manufacturers´. The reason was simple. Though Indian players had set up manufacturing units, except a few bigwigs, no one tried to utilise their manufacturing capacity to the fullest for solar cells and modules. Instead, private players turned those manufacturing units into assembly units, with the availability of low cost employment. To some extent, the fall-back was the result of the Government´s unwillingness to adopt protectionism on innovative technology and the Indian manufacturers´ over-reliance on the European and US markets.

Vishwanathan Iyer, DGM & Head - Business Development (Solar), Sterling and Wilson says, ´Very few of them have manufacturing capacity of more than 200 MW. In short, the sector is extremely fragmented.´

Hence, where the Indian manufactures were busy importing materials from these two markets, China at the same time, was building its manufacturing capacity and producing much more cheaper cells and modules than India. The search for lucrative markets has opened up the entry of Chinese PV products into India. The impact was so much that the demand for Indian products came down drastically from the domestic market and the solar project developers started importing material from China. Here, the decade saw the rise of the Dragon.

Pricing war
The intense competition between Indian solar PV manufacturers and their Chinese counterparts has caused Indian manufacturers to either bring down the cost of the products they offer or produce inferior or substitute materials for solar panels. But unfortunately, many Indian manufacturers have opted for the latter, and this has resulted in longer term consequences, such as putting system reliability, company reputations, and the credibility of the entire solar industry at risk.

Thin-film solar technology costs less but is less efficient. Yet, for more than 60 per cent of Indian projects, thin-film has been preferred, while it has been the choice of only 14 per cent of the projects worldwide. Developers could procure low-cost thin-film modules with lower interest rates from China, which couldn´t be matched in India.

´With many Chinese solar manufacturers with huge infrastructure to mass produce, no solar PV manufacturing company in the world, let alone Indian module companies, can match the prices,´ agrees DT Barki, Director (Technical), Photon Solar.

To this, KN Subramaniam, CEO Solar Business, Moser Baer Solar says, ´Owing to the cost pressure coming from global suppliers, some manufacturers choose to substitute unproven or inferior materials in solar panels to reduce their short term costs.´

´The key to becoming more cost-competitive is for the industry to focus on material choices that can increase the power output and reliable lifetime of solar panels so that higher investment returns can be achieved for solar energy systems,´ says Rajaram Pai Business Leader, DuPont India.

Muted manufacturing
It is true that the Indian manufacturing story was unable to match the country´s solar PV project demand. In India, between 2010 and 2014, solar PV installations have grown from a few MW to 2 GW. Given this growth, Iyer from Sterling and Wilson expects the upward trajectory to continue in the forthcoming year as well, with State solar programs in Karnataka, Telangana/Andhra Pradesh, Madhya Pradesh and the Solar Mission, supported by growing excitement among industrial and commercial consumers to venture into purchase of solar power in the private space.

However, though the installation capacity has grown multifold, the manufacturing capacity has been muted. Let´s see a comparative analysis. During 2007 to 2012, China´s solar module manufacturing capacity grew from less than 5 GW to 50 GW at the end of 2012, more than double that of the rest of the world. Whereas, till date, the installed capacity of cell manufacturing in India is 1,216 MW, and the capacity under operation is a mere 240 MW. On the other hand, the installed capacity of manufacturing of modules was 2,348 MW, the capacity under operation was just 661 MW.

But despite the growing number of projects, Jagat Jawa, Director General, Solar Energy Society of India (SESI) blames the government for insufficient projects which led to muted order growth. ´During the last few years, the local solar manufacturing industries had suffered badly because of lack of sufficient orders,´ he says.

No more a dumping zone
According to a notification on 22 May 2014, the Directorate General of Anti-Dumping and Allied Duties (DGAD) under the Ministry of Commerce and Industry has recommended imposition of anti-dumping duty on import of solar cells and modules from China, Taiwan, Malaysia and the US. Investigation into the issue began in November 2012 after the Indian Solar Manufacturers´ Association complained that imports from these target countries were damaging the domestic solar manufacturing sector. In its notification, DGAD had noted that there are 42 solar crystalline cell and/or module manufacturers in India. DGAD has noted that 39 of these manufacturers have imported goods from target countries, and have been not considered as part of the domestic industry for this investigation.

It was also highlighted that the domestic thin film industry has a negligible presence and the few manufacturers with nominal output of thin film solar modules in India reportedly rely on imports from target countries. Only three companies, with 12 per cent of the total domestic production, represented the domestic industry during the investigation.

The experts and associations believe that it is the anti-dumping policy which can save Indian domestic manufacturers. ´If Europe and the US have resorted to anti-dumping duties to protect local industries and local jobs, why not India?,´ asks Jawa from SESI. To this, Pai from DuPont India says that the anti-dumping move will be good for the local manufacturing industry as buyers would have a wider choice through local partners, and can create more jobs and value for the country.

The objective of the anti-dumping duties is to protect local interests against imported products which may threaten the local industry. With the duties imposed, imported solar cells and modules will cost 1.15-2.3 times the recent prices and this is perceived to benefit domestic manufacturing. It is estimated that consequently, the Indian modules will cost 10-25 per cent more than the currently prevalent Tier-1 photovoltaic prices. ´We are talking about the Tier-1 Chinese solar companies who maintain high quality at lowest possible prices. It's therefore, tough for any Indian company to compete with a Chinese company in every which way,´ says an insider from MNRE. To this, Barki from Photon Solar advises that if Indian manufacturers have to survive, imposition of anti-dumping duties is the only way out. Otherwise, on the global front, allowing international competition has its own benefits for global ecology, which must be the priority.

Going forward, the anti-dumping duty may bring some respite to the Indian solar PV manufacturing industry. But international observers feel that this move may choke Modi´s solar revolution. The views of the Confederation of Indian Industry (CII) are also in line with international observers.

Now, the industry is cautiously optimistic. Players expect a solar PV market of about 1 GW in India this year, given that the cloud of anti-dumping duty hovering over the industry could play spoilsport and prove a serious deterrent, slowing the solar growth story.

That said, PT expects that the industry will get over this uncertainty as well, given that the Finance Ministry has to announce a decision on the dumping issue within the next couple of months. We wish and hope whatever be the decision, it works towards the benefit of consumers and solar power producers in general.

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