MNRE Reinstates 2021 ALMM List to Boost Local Solar Module Manufacturing

Context:

In March 2024, the Ministry of New and Renewable Energy (MNRE) announced the re-implementation of its 2021 notification for the ‘Approved List of Models and Manufacturers of Solar Photovoltaic (PV) Modules’, commonly referred to as the ALMM list. This move aims to bolster local sourcing of solar modules and bolster India’s renewable manufacturing ecosystem. However, the decision is perceived by many as imposing import restrictions on solar PV cells, potentially impacting the solar industry’s growth and dynamics in India.

Relevance:

GS III: Indian Economy

Dimensions of the Article:

1. What does the Approved List of Models and Manufacturers of Solar Photovoltaic Modules (ALMM list) entail?
2. Solar PV Imports in India
3. Initiatives by India to Boost Domestic Manufacturing
4. Potential for Solar Energy in India

What does the Approved List of Models and Manufacturers of Solar Photovoltaic Modules (ALMM list) entail?

Overview

• This compilation features manufacturers deemed suitable for Government Projects, projects with government assistance, and initiatives under government schemes.
• It encompasses projects designated for selling electricity to both Central and State Governments.

Suspension of Rules for Two Years

• The government withheld the enforcement of this list for a two-year period, without providing a definitive explanation.
• Speculation suggests this hiatus arose due to concerns from renewable energy producers, especially those with pre-existing contracts to supply electricity to the government.
• During this period, the majority of solar equipment imports originated from China due to cost-effectiveness.
• India’s domestic renewable energy sector struggled to match the demand for solar equipment, given the competitive pricing by Chinese manufacturers.

Reinstating the Rule

• The government reintroduced the rule in March 2024.
• The decision to revive this list stems from the belief that initiatives like the Production Linked Incentive (PLI) scheme have bolstered Indian companies’ production capacities, enhancing their competitive pricing.

Objective of the PLI Scheme

• The Production Linked Incentive (PLI) scheme is designed to stimulate investments in pivotal sectors, foster economies of scale, and elevate the competitiveness of Indian manufacturers.

Integration with the Atmanirbhar Bharat Programme

• The scheme aligns with the Atmanirbhar Bharat (‘Self-Reliant India’) Programme.
• The government now trusts that domestic companies can sufficiently meet the product demand within India.
• This initiative primarily focuses on promoting domestic production as an alternative to imports, rather than imposing import restrictions.

Solar PV Imports in India

Reliance on China and Vietnam

• India heavily relies on imports to fulfill its solar cell and module demands, with China and Vietnam emerging as the primary suppliers.

Import Figures

• Government data presented to Parliament in February 2023 revealed that India imported solar cells and modules worth approximately $11.17 billion over the past five years.
• Until January 2023-24, Ministry of Commerce data indicated that China constituted 53% of India’s solar cell imports and 63% of solar PV module imports.

Factors Behind China’s Dominance in Exports

• China offers the most cost-effective manufacturing location for all solar PV supply chain components, primarily due to lower industrial power costs.

Impact of Electricity Costs on Production

• Electricity contributes to over 40% of the production costs for polysilicon and nearly 20% for ingots and wafers.
• Chinese government policies have prioritized solar PV as a strategic sector, fostering economies of scale and continuous innovation across the supply chain.

Initiatives by India to Boost Domestic Manufacturing

Implementation of the ALMM Order

• The government announced the ALMM order in January 2019, but it gained prominence amidst significant global supply chain disruptions during the COVID-19 pandemic.

Launch of the PLI Scheme

• Finance Minister Nirmala Sitharaman introduced the ₹19,500 crore PLI scheme in the Union Budget of 2022-23 to bolster domestic manufacturing across the solar supply chain, from polysilicon to solar modules.

Implementation of High Custom Duties

• The government imposed a substantial 40% customs duty on PV modules and 25% on PV cells to encourage domestic manufacturing.

Potential for Solar Energy in India

Rising Demand

• The government’s ambitious goal of achieving 500 GW of installed capacity from non-fossil fuels by 2030 drives the expansion of solar power in India.
• India exhibits the fastest growth rate in electricity demand among major economies through 2026, fueled by robust economic activity and increasing consumption to mitigate extreme weather conditions.

Contribution of Solar Power to Renewable Energy Generation

• Between April 2023 and February 2024, solar power accounted for approximately one-third of all energy generated from renewables.

Untapped Solar Energy Potential

• India possesses an estimated solar power potential of 748.99 GW, indicating that the full potential of solar energy remains largely untapped.
• The government is actively pursuing various schemes and programs to harness this available potential effectively.

-Source: The Hindu