PLI Scheme For Domestic Manufacturing Of Solar PV Module Gets Additional Allocation Of ₹19500 Crores In Budget 2022

Union Finance Minister Nirmala Sitharaman on Tuesday said that an additional allocation of Rs 19,500 crore has been made under the Production Linked Incentive (PLI) scheme for manufacturing high efficiency solar modules.

“To facilitate domestic manufacturing for the ambitious goal of 280 gigawatt (GW) of installed solar capacity by 2030, an additional allocation of Rs 19,500 crore for PLI for manufacturing of high-efficiency modules with priority to fully integrate manufacturing units to solar PV modules will be made,” Sitharaman said while presenting Union Budget 2022-23.

In April 2021, the government had announced an Rs 4,500 crore PLI Scheme ‘National Programme on High Efficiency Solar PV Modules’. The scheme aims to promote manufacturing of high efficiency solar PV modules in India and thus reduce import dependence in the area of Renewable Energy.

The scheme has provisions for supporting setting up of integrated manufacturing units of high efficiency solar PV modules by providing Production Linked Incentive (PLI) on sales of such solar PV modules. The scheme is being implemented by the Ministry of New & Renewable Energy (MNRE) through Indian Renewable Energy Development Agency (IREDA) as Implementing Agency.

The enhanced allocation to the PLI scheme aims to further incentivise manufacturers to set up a fully integrated solar PV manufacturing plant using silicon based technology (starting from the stage of manufacturing of polysilicon, to ingot/wafer to Solar Cell and Module) or fully integrated thin film technology or any other technology.

India has set an ambitious target of setting up 175 Gigawatts (GW) capacity of renewable energy by 2022 and 450 Gigawatts (GW) by 2030. On the basis of techno-economic analysis, Central Electricity Authority (CEA) has indicated in their Optimum Energy Mix report that 280 Gigawatts (GW) capacity from solar energy will be needed by 2029-30.

To achieve the target, around 25 Gigawatts (GW) solar energy capacity is needed to be installed every year, till 2030.

Solar capacity addition presently depends largely upon imported solar PV cells and modules as the domestic manufacturing industry has limited operational annual capacities of around 2,500 Megawatts (MW) for solar PV cells and 9,000-10,000 Megawatts (MW) for solar PV modules.

India lacks domestic manufacturing capacity in solar modules and largely depends on imports for its requirements. Indian manufacturers also suffer from poor economies of scale. Consequently, domestic producer’s modules are priced higher vis-à-vis imports, making them less competitive. According to CRISIL, India had 8 GW of solar module capacity as on March 2021. Because of high cost, even this capacity remains underutilised.

Compared to this, Chinese modules are estimated to be 15-25 percent cheaper in part due to subsidies and scale efficiencies.

India also has very limited or no manufacturing capacity in polysilicon and wafers, the key component for solar cells. Apart from poor scale, Indian solar module manufacturers suffer from low investments in research and development (R&D) and slow pace of technology adoption, according to industry observers.

The increased outlay for production linked incentive scheme in the Budget 2022-23 is likely to catalyze large scale investments in the solar module supply manufacturing and address the cost competitiveness of the domestic manufacturers.