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Production Linked Incentive Scheme for Solar PV – Benefits for Manufacturing, Investments and Employment

solar PV

India’s economy has been growing in double digits over the last few years and is expected to maintain this trajectory in the coming years as well. It took only 3 years to reach $ 3 Trillion (Tn) in GDP in 2020 from $ 2 Tn 2017 and is expected to reach $ 8-9 Tn in GDP by 2030. The strong economic growth has consistently also captured the attention of the foreign investors and this is expected to keep up the momentum. To provide an impetus to this growth story and ensure that manufacturing sector is also an equal contributor to the numbers, government of India announced the launching of the Production Linked Incentives [ PLI] scheme for 10 focus sectors for our country in November 2020. The financial outlay of these schemes totaled INR 1.97 lakh crore [$ 610 Mn]. Of this total outlay, INR 4500 crore has been allocated to the solar sector for the PLI scheme “National Programme on High efficiency Solar Photo Voltaic (PV) modules” over 5 years starting financial year 2021-22. The scheme will incentivize Gigawatt (GW) scale solar manufacturing in India to domestically build up the scale and size of manufacturing in this sector.  

India has set an ambitious target of setting up 175 GW capacity of renewable energy by 2022 and 450 GW capacity by 2030. On the basis of techno-economic analysis, Central Electricity Authority (CEA) has indicated in their ‘Optimum Energy Mix’ report that 280 GW capacity from solar energy will be needed by 2029-30. To achieve the target, around 25 GW solar energy capacity is needed to be installed every year, till 2030. But at present, solar capacity addition in India majorly depends upon imported solar PV cells and modules. The domestic manufacturing industry has limited operational annual capacities of around 2.5 GW for solar PV cells and 9-10 GW for solar PV modules. The PLI scheme for high efficiency solar PV modules, aims to provide impetus to the domestic industry to scale up manufacturing in the coming years so that majority of this demand can be met domestically itself and India does not have to depend on imports to fulfill its demands. This will also help build India’s capacity and technological capability to become part of the global supply chain for high efficiency solar PV modules and cater to the international market as well. 

It is envisaged that 10,000 Megawatt (MW) capacity of integrated solar PV manufacturing plants will be set up by Q4 of 2022-23 with the direct investment for around INR 14,000 crore. The scheme will additionally create further demand of INR 17,500 crore over a period of 5 years for locally produced balance of materials like EVA, solar glass, back-sheet, junction box etc, which will help in the development and augmentation of entire ecosystem associated with solar PV manufacturing. For the purpose of assessing the applications, the scheme will focus on three main parameters – extent of integration, manufacturing capacity and minimum module performance [minimum module efficiency and temperature coefficient]. Setting up integrated plants with gigawatt capacities will ensure better quality control over the products as well as develop competitiveness in the manufacturing of solar PV modules. This will also help develop a reliable domestic ecosystem for sourcing local materials in solar PV manufacturing. Ensuring minimum module performance will promote manufacturing of high efficiency modules with cutting edge technologies and superior performance. 

In addition to the increased domestic manufacturing, investments and capacity augmentation, the scheme will also lead to added benefits such as creation of direct employment of around 30,000 persons in manufacturing activity and indirect employment of around 1,20,000 persons engaged in ancillary and allied industrial activities, packaging, logistics and other services.  Additional manufacturing capacity will also result in import substitution of the domestically manufactured quantity, thereby leading to savings in foreign exchange of approximately INR 17500 crore per year.