Funding offers at low rates by the United States will ruin the domestic solar photo-voltaic (PV) manufacturing industry, the Centre for Science and Environment (CSE) has said.

The US Exim Bank and the Overseas Private Investment Corporation (OPIC) are offering loans at about three per cent interest rates to Indian solar project developers on the mandatory condition that they buy the equipment, solar panels and cells from American companies.

Terming this practice as “unethical”, a CSE release on Friday said, “Currently, 80 per cent of Indian manufacturing capacity is in a state of forced closure and debt restructuring with no orders coming to them, while US manufacturers are getting orders from Indian solar power developers.”

Chandra Bhushan, CSE’s Deputy Director General, said “Fast start financing is a $30-billion fund set up under the United Nations Framework Convention on Climate Change. The fund, adopted at the Copenhagen climate meeting in 2009, is supposed to help developing countries deal with climate change impacts.”

However, CSE researchers pointed out that the US was taking advantage of a loophole under the Jawaharlal Nehru National Solar Mission (JNNSM), which plans to install 22,000 MW of solar energy by 2022, that mandates a domestic content requirement, but does not mention thin-film PV technology.

The US Exim Bank and OPIC have been offering low interest rates and a repayment schedule of up to 18 years to Indian solar project developers on the condition that they buy thin-film panels manufactured by US companies, they said. 

Since Indian banks offer interest rate of close to 14 per cent or more, this has skewed the market in favour of thin-film panels imported from US, they said, adding that thin-film had lower efficiency as compared to crystalline panels. Close to 60 per cent of the panels installed in India are thin-film type, they added.

According to the US Department of State reports of the year 2010 and 2011 on fast start financing, $248.3 million has been disbursed by the US Exim Bank and OPIC for grid-connected solar plants in India. The major beneficiaries in this case have been American producers such as First Solar and the now bankrupt Abound Solar.

The CSE researchers analysed the state of renewable energy resources and infrastructure in India and the country’s preparedness to meet the Solar Mission goals. The Mission‘s first phase draws to a close next year.

(This article was published in the Business Line print edition dated August 20, 2012)
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