Union Budget 2022: Impact of Solar PLI Scheme
Renewable energy has been a champion sector for India. With increasing concerns for the environment across the world, the sector becomes one of key importance.
The Government of India, led by Prime Minister Modi has been taken huge leaps towards developing the sector. India is leading the revolution towards a clean India powered by green sources of energy. During COP 26 in Glasgow in November 2021, India made the following commitments:
1. Reduce total projected carbon emission by 1 billion tonnes by 2030
2. Reduce the carbon intensity of the nation’s economy by less than 45 per cent by the end of the decade
3. Net-zero carbon emissions by 2070
4. 500 GW of non-fossil fuel energy in the energy mix
India is well on its way to achieve its green energy commitments. Currently, India’s total renewable installed capacity stands at 151 GW. India has been designated as a ‘Global Champion’ for energy transition at the UN High Level Dialogue on Energy and also ranked 3rd in EY Renewable Energy Country Attractiveness Index. Additionally, India is the only G20 that has 1.5 degrees Celsius compliant policies.
Not only is India making strides in increasing its renewable energy capacity but is also working towards building world class manufacturing capabilities. India’s solar sector has been showing tremendous growth. The domestic solar manufacturing industry has annual capacities of around 2.5 GW for solar Photo Voltaic (PV) cells and 9-10 GW for solar PV modules. Currently India’s PV module sector has an import dependency of 75-80 per cent and 90 per cent for solar PV cells. The domestic manufacturing capacity was expected to be scaled up to 10 GW capacity of integrated solar PV manufacturing plants (from manufacturing of wafer-ingot to high efficiency modules) by Q4 of 2022-23 via the Production Linked Incentive (PLI) Scheme which was announced last year for high efficiency solar PV modules with an outlay of INR 4500 crore.
The PLI scheme received bids from 18 players. Building upon the success, the Indian government provided a further boost to the scheme. As per the union budget announcement for 2022-23, made by Finance Minister Nirmala Sitharaman on February 1, 2022, the scheme has received an additional outlay of INR 19,500 crore. According to a recent CRISIL report, this will enable setting up of 30-35 GW of solar PV capacities by fiscal 2024.
In addition, other initiatives such as BCD imposition, Domestic Content Requirement, Approved List of Modules and Manufacturers and Manufacturing Linked Tenders, were also introduced to boost India’s domestic solar manufacturing.
The Basic Custom Duty on solar modules (40 per cent) and solar cells (25 per cent), will come into effect from April 1, 2022. This will raise the project cost until domestic capacity is scaled up to support the current demand from solar project developers, who have a 40 GW pipeline. This will encourage faster development of domestic capacities in order to drive down costs and ensure greater profitability.
Thus, India is on its way to capitalize on the solar potential of the country and develop a clean green sustainable future.