The production-linked incentive (PLI) scheme for the renewable sector could facilitate the development of an additional 8-12 GW of annual solar cell and module manufacturing capacity, says a report of India Ratings and Research.
The allocation of ₹4,500 crore towards the solar modules manufacturing industry by the Ministry of New and Renewable Energy (MNRE) is expected to boost domestic manufacturing attract investments and reduce solar imports.
The scheme can facilitate additional 8-12 GW annual solar cell/module manufacturing capacity in India. Sales up to 50 per cent of the manufacturing capacity set up by the winning bidder will benefit from PLI. This estimate assumes the base PLI rate of ₹2.25 per watt power and entirely greenfield expansion.
“The scheme is definitely a shot in the arm and the much-required step to tackle import requirements and bring it down from 90 per cent import requirement levels to 64-74 per cent on an average till FY30,” it said.
However, the amount under the scheme will have to go significantly up if India has to reduce its import dependence any further, assuming India is to proceed on its target of 280GW solar capacity by FY30.
India has set a target to install 280GW of solar power plants by FY30 out of which about 240GW is under pipeline or yet to be implemented, which means just 8-13 per cent of this planned requirement is going to benefit directly from this PLI scheme till FY30 (assuming localisation to be in between 65 per cent and 100 per cent), apart from improving the domestic manufacturing capacity.
Consolidation
The scheme could lead to more sector consolidation (from the current 15-20 players with significant capacities) to benefit from the economies of scale.
“Higher scales and requirement of backward integration will require much larger investments into the sector, resulting in near-term natural consolidation, as small players who cannot benefit from the scheme will become uncompetitive compared to both domestic manufacturers benefitting from PLI scheme and imported cells/modules,” it said.
But on the flip side, given the strict timelines for implementation, the scheme may lose out on its intended purpose for the level of backward integration. All in all, this a good start, but timely disbursements, ease of processes and scaling up the scheme amount will be key things to look out for over short to medium tenure to see India self-reliant and simultaneously being economically viable to meet its solar power ambitions, the report said.