Solar power

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Prime Minister recently restated the importance of solar power in restarting the economy and moving towards sustainable development.

inauguration of a 750 MW photovoltaic project at Rewa, in Madhya Pradesh

India expanded its solar generation capacity 8 times from 2,650 MW in May, 2014 to over 20 GW in January, 2018, and 28.18 GW in March, 2019.
The government had an initial target of 20 GW of solar capacity by 2022, which was achieved 4 years ahead of schedule.
In 2015, according to Paris climate deal, India agreed to the target of 100 GW of solar capacity by 2022

domestic solar manufacturing industry that delivers increasing volumes of quality photovoltaic cells, modules and associated equipment is missing

According to the Ministry of New and Renewable Energy (2018), India has an annual solar cell manufacturing capacity of about 3 GW.
But markedly, the average annual demand is 20 GW.
The shortfall is met by imports of solar panels.
The government is a near monopsonistic buyer (the market condition that exists when there is one buyer) in solar sector.
India is regarded by the global solar industry as one of the most promising markets.
But the low-cost Chinese imports have undercut India’s ambitions to develop its own solar technology suppliers.
Imports, mostly from China, accounted for 90% of 2017 sales, up

Core competence – It takes time for companies to learn and put in action new technologies.
The 6 largest Chinese manufacturers had core technical competence in semiconductors well before starting solar cells manufacturing.
In contrast, Indian companies had no learning background in semiconductors when the solar industry in India began to grow from 2011.
State governments need to support semiconductor production as part of a determined industrial policy to develop this capacity.

Government policy – The Chinese government has subsidised land acquisition, raw material, labour and export, among others.
None of this is matched by the Indian government.
Perhaps even more important is commitment by the government to procure over the long run.
This is crucial for investment in building up the design and manufacturing for each of the 4 stages of production of solar power equipment.

Remaining dependent on imports only leads to short-term benefits for India.
Substituting for imports requires human capabilities, technological capabilities and capital in the form of finance.
Making input components locally instead of importing them and putting the modules together here are essential for covering the entire supply chain.
Public procurement should be promoted with high priority.
The government is still free to call out bids for solar power plants with the requirement that these be made fully in India.
This will not violate any World Trade Organization (WTO) commitment.

If the bids are large enough with supplies spread over years, then bidders will emerge and local manufacturing can begin.
This is because it will give enough time for a green field investment to be made for manufacturing in India.
In all, India needs a solar manufacturing strategy, perhaps like the Automotive Mission Plan (2006-2016).
[The Plan is credited with making India one of the largest manufacturers of two-wheelers, three-wheelers, four-wheelers and lorries in the world.]