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PLI scheme for solar PV modules, BCD a positive for domestic OEMs: ICRA

Our Bureau Hyderabad | Updated on May 03, 2021

To support 21 GW modules from over 5 years

The Ministry of New & Renewable Energy guidelines for the Production-Linked Incentive (PLI) scheme is expected to promote the domestic manufacturing of high efficiency solar modules and reduce dependence on imports in the solar power sector.

The benefits available under the PLI scheme along with the imposition of basic customs duty (BCD) on imported solar PV cells and PV modules are likely to improve the cost competitiveness of domestic PV module manufacturers against imported modules by more than 10 per cent at the prevailing imported module prices, under assumption of backward integration up to cells

The scheme has been approved with a financial outlay of ₹4,500-crore over a period of five years.

Girishkumar Kadam, Co-Group Head & Vice President - Corporate ratings, ICRA, said: “The benefits available under the PLI scheme along with the imposition of basic customs duty (BCD) on imported solar PV cells and imported solar PV modules are likely to improve the cost competitiveness of domestic PV module manufacturers against imported modules by more than 10% at the prevailing imported module prices, under assumption of backward integration up to cells.”

The scheme beneficiaries will be selected through a bidding process, with the applicants proposed to be evaluated based on the extent of integration and capacity.

Vikram V, Sector Head & Assistant Vice President - Corporate Ratings, ICRA, said: “At the base PLI rate of ₹2.25 per watt power, the PLI outlay of ₹4,500 crore can support manufacturing and sale of 21 GW of solar PV modules over a five-year period, translating into 4 GW per annum, at the base module efficiency specified in the guidelines and considering a full backward integration of the proposed units. However, this remains lower than the expected annual solar PV demand of 8–10 GW in India, in the near to medium term. In this context, the dependence on imported solar PV modules may continue in the near to medium term.”

The manufacturers are required to commission the units within 1.5 to 3 years from the date of sanction. The timeline increases as the integration moves from cells and modules to include wafers, ingots and polysilicon. Inability to meet the bid capacity and efficiency will make the manufacturers ineligible for PLI payments, till the deficiencies are rectified. Also, in case the actual PLI claimed by the bidder is lower than the quoted value by more than 25 per cent for a particular year due to lower sale volumes, it would lead to limitation of PLI disbursement to 95 per cent of the actual PLI claimed.

Published on May 03, 2021

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