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Interaction | November 2014

Cash-rich PSUs are eyeing solar space

Since many PSUs are sitting on cash piles, the government has told these PSUs to invest more in the solar space. The golden days are back, says Sudershan Gupta, EVP Corporate Strategy and IPP Management, Jakson Group.

How do you see the move of the government of India on anti-dumping (AD)? Was making AD lapse a surprise?
The move was very much on the cards. The basic reason to abolish the existence of anti-dumping was since India is a power deficit country. The lapse of AD clearly suggests that the government does not want to take any risk on the targets they have envisaged for the renewable space. Another reason was since the government is emphasising more on "Make in India" movement, the lapse in AD will certainly give the much-needed push to the ailing manufacturing activity in the solar space. The move has assured that now the domestic solar module industry can set up or ramp-up its manufacturing activity to cater to the domestic demand. At the same time, if there is unavailability of raw material domestically, the developers can procure from other countries.

The lapse in AD has also made sure that in future government tenders, there will be a stipulation for approximately 50 per cent content requirement from domestic players and the remaining from other countries. The government has done a balancing act which takes the concerns of both parties into account.

But although the government has done a balancing act, solar power developers are inclined towards foreign content....
And they will because for certain pockets where imported content is allowed, the solar developers will try to procure them. But the government will ensure, either directly or indirectly, a push for local content and will come out with opportunities for the procurement of local content requirement. It (the government) will also see to it that the existing manufacturing capacities will run in full capacity, which means, we can expect a number of solar power projects in the offing.

So with this do you expect fresh capacity addition on the domestic front?
We can surely expect a rise in production activity in the coming years, at least, but addition of fresh or greenfield capacity in cell manufacturing is a million dollar question because in the future domestic production will not be cost competitive as compared to foreign content due to unavailability of silicon wafers in India.

And those companies which are manufacturing right from silicon to modules, have a base in other countries and Indian companies cannot be cost competitive with them at all by just importing silicon. So the production capacity will get added up, but on a small level basis.

Shall we call this as a pragmatic, 'big picture' decision by the new NDA administration which will remove uncertainty and put the solar industry back on track for sustainable, long-term growth? Or have they just averted the wrath of solar developers overlooking demands of solar PV manufacturers?
Absolutely. Because now many government PSUs, mainly in power sector, are setting up solar power projects to increase their incremental capacity which will allow the solar industry to develop along with manufacturing activity at a controlled pace.

And for solar sector the way government has made headway, the question now is how much of money can be invested. In fact, the targets have been revised upwards so much that the question is how much investment can this sector attract. Targets are no longer a constraint. It's a question of how much of investment -- domestic and international -- is ready.

But with the targets for investment in infrastructure sector getting lowered, that also includes the renewable space, how do you expect investment in billions in the solar space?
Even though the targets have been lowered, you must understand the same committee has increased the investment target of PSUs too, which are sitting on piles of cash. And the government has a clear mandate to invest in the renewable space. So the rich PSUs are taking initiatives in developing solar power projects. So lowering investment will not hamper this space at all. NTPC has a target of around 4,000 MW, Coal India Ltd has a target of around 1,000 MW and there are other PSUs too which are interested in investing in solar space. So a massive deployment of capacity addition will happen in the solar space.

- Rahul Kamat

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