Strengthening domestic solar mfg ecosystem key to achieve climate targets

It's miles to go before the sunny side is actually up. The Modi 2.0 government has set a target of 40 per cent renewables by 2030, which in real terms, means 500 GW of renewable energy by that time. Not that it's not achievable, but the government along with the sector need to work hard and in a planned manner to reach there. Speaking to

Bizz Buzz exclusively, Gyanesh Chaurdhary, Vice Chairman and Managing Director, Vikram Solar, explains what the government needs to do to walk the talk and ensure that India reaches there

Do you think that the government of India is on the right track, in terms of its focus on clean energy and more particularly with regard to solar adoption?

The Government of India under the leadership of the Prime Minister Narendra Modi, has accelerated the transition to clean energy with solar adoption. This is evident from the earlier achievement (in calendar 2021) of the COP21 target of 40 per cent renewables by 2030, nine years ahead of schedule. Solar (48.55 GW) has been at the forefront leading this transformation of India's renewable landscape. The government's steps toward encouraging solar adoption and transitioning to renewable energy sources has indeed fast-tracked the solar sector.

This has been possible due to the government's consistence and conducive policy impetus for the renewable energy sector. The target of 500 GW renewable energy by 2030, PLI budget expected to be increased to Rs 24,000 crore for solar cells and modules and India's net zero emission target by 2070 will bring incredible new opportunities.

What do you expect from the forthcoming Union Budget?

In the Union Budget 2022-23, we are hopeful the government will continue the targeted initiatives and policies to further strengthen the domestic solar manufacturing eco-system aligned to the Aatmanirbhar Bharat vision and the government's target of 500 GW renewables by 2030. This will accelerate economic recovery, create jobs, attract investments, increase exports, reduce dependence on imports and enable India's energy security. The upcoming Budget must also continue to focus on boosting private investments and enhance expenditure on infrastructure. Initiatives like the National Policy on Electronics, increasing export incentives, launching phased manufacturing programmes (PMP), the Modified Special Incentive Package Scheme, and planning a new industrial policy under the current regime had increased FDI flows to the country and created an environment to transform the manufacturing sector.

Besides schemes for solar parks and ultra-mega solar projects, schemes for setting up 5-GW grid connected solar power projects, a Central Public Sector Undertaking (CPSU) scheme for setting up 12 GW grid connected solar project with Viability Gap Funding (VGF) support, the grid connected solar rooftop programme, 100 per cent Foreign Direct Investment (FDI) have been steps in the right direction towards the clean energy transition. Hope there will be a continuity and further progress in all these.

There have been some other moves and initiatives also which fuelled and facilitated growth in renewable sector, especially solar sector….

Yes, yes, the recent approval of the second phase of the green energy corridor project, Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan Yojana (PM-KUSUM), subsidies for ground mounted and rooftop solar installation, net-metering to improve solar installation and green energy generation within the country are welcome steps enabling India's transition to a low-carbon economy.

What would be your key recommendations for the Union Budget that would boost solar adoption and manufacturing?

My key recommendations for the Union Budget to boost solar adoption and manufacturing would be:

- The 80 per cent Accelerated Depreciation benefit to be re-instated for Solar industry

- Imposition of Basic Customs Duty (BCD) effective 1st April, 2022

- Allowing clearance from Special Economic Zones (SEZ) to Domestic Tariff Areas (DTA) on a duty forgone basis

- Allowing conversion of SEZ units in SEZs into DTA and continue operating from the same infrastructure, with enabling rules for conversion. Further, the duty payments on conversion to DTA to be linked with the status of Net Foreign Exchange (NFE) of the unit

- To enhance the global competitiveness of domestic manufacturers, export incentive and remission of Duties or Taxes on Export Product (RoDTEP), rates should be enhanced. The rates should be commensurate with the actual embedded/un-refunded taxes and duties. RoDTEP benefits should also be provided to SEZs

- National Clean Energy fund (NCEF) should be made available to solar manufacturing firms to expand their Research and Development to produce cost-efficient energy solutions

- States/Municipal corporations across the country should be provided with dedicated budgets for solar rooftop installations under the NCEF

- Capital subsidy of 50 per cent to set up R&D and quality testing infrastructure within the manufacturing unit would encourage entrepreneurs to build scale with quality

- Super deduction of 200 per cent for R&D expenses for clean energy and particularly solar technology development

- Setting up of a dedicated agency to provide insurance cover for solar power installations at affordable prices would give a good boost to the sector

- 5 per cent Interest Subvention on term loans and working capital, upfront Central Financial Assistance of 30 per cent on CAPEX   

- Special fund should be allocated to develop an Electric Vehicle (EV) battery ecosystem

- Introduction of a refund mechanism of GST for GST distributed to SEZ units from common GST inputs, which was there in the Service Tax regime

- Exemption of GST on the freight paid on imports as GST has already been charged on Cost, Freight and Insurance (CFI) value of imports

- In RoDTEP include AA (Advance Authorisation), along with SEZ

- A cess on diesel should be imposed and used to expand EV infrastructure in the country.

What do you expect the government to do to achieve the target of 500 GW renewable energy by 2030?

In order to achieve target of 500 GW renewable energy by 2030 announced at COP26 and enable the Aatmanirbhar Bharat vision, we are hopeful that the government will continue the targeted initiatives and policies to further strengthen the domestic solar manufacturing eco-system. This will accelerate economic recovery, create jobs, attract investments, increase exports, reduce dependence on imports and enable India's Energy Security. To enhance global competitiveness of domestic solar manufacturers, the imposition of Basic Customs Duty (BCD) on solar cells & modules effective April 1, 2022, increasing the production-linked incentives (PLI) funding outlay for solar modules, enhancing the export incentive- Remission of Duties or Taxes on Export Product (RoDTEP) rates and ensuring it includes AA (Advance Authorisation) along with SEZ are critical policy interventions. We also urge the finance ministry to consider 5 per cent Interest Subvention on term loans and working capital and upfront Central Financial Assistance of 30 per cent on Capex.  

What should the government do in specific terms to encourage home-grown solar manufacturers?

In order to encourage domestic solar manufacturers to build scale with quality, the government should consider capital subsidy of 50 per cent for setting up R&D and Quality testing infrastructure within the manufacturing unit and super deduction of 200 per cent for R&D expenses for solar technology development. The upcoming Budget must also consider allowing clearance from Special Economic Zones (SEZ) units to Domestic Tariff Areas (DTA) on a duty forgone basis. Additionally, we also recommend allowing conversion of SEZ units into DTA and permitting them to continue operating from the same infrastructure with enabling policies.