Can Domestic Manufacturers Capture a Larger Pie of Indian Solar Market?

Solar installations in India reached 4 GW in 2016, and are expected to surpass 9 GW in 2017, an incredible pace of growth considering our country installed just 883 MW in 2014. With exponential growth in the sector, the Government wants to ramp up domestic manufacturing to decrease the volume of solar module imports which, along with installations, has also increased dramatically. The challenge, like in most markets, has been that of cost competition from Chinese manufacturers. India lost its case at the World Trade organization (WTO) last year which ruled that its Domestic Content requirements (DCR) discriminated against US manufacturers. With this backdrop, Indian policy makers are now looking at various options to support domestic manufacturers without violating global trade agreements.

The Indian solar manufacturing sector was active long before any policy or significant market demand existed in our country. The sector mainly focused on original equipment manufacturing and exporting to European countries. India had exported modules worth almost a billion dollars before the National solar Mission was established. Exports boomed in 2008 with a massive growth in global demand, but the slump in 2009 (due to the global recession) slowed the sector. as manufacturing took off in China, prices dropped to record low levels. From the beginning of 2011 through the end of 2012 module prices fell from $1.80/W to $0.65/W, a 65 percent drop. The state-funded Chinese manufacturers captured most of the global market at the cost of manufacturers elsewhere, including Indian manufacturers.

The installed capacities of domestic solar cells and modules in India were estimated to be 2,815 MW and 8,008 MW, respectively, while their operational capacities were 1,448 MW and 5,246 MW, respectively, as of December 2016, according to the Mercom’s Manufacturing Tracker.

However, the manufacturers paint a different picture. Most of them are of the opinion that the true working module manufacturing capacity was approximately 3 GW at the end of 2016. This huge disparity in the figures is due to old and obsolete manufacturing lines that are still being counted by the manufacturers as “operating capacity”.

As of December 2016, an estimated 9.6 GW of solar capacity has been installed in India. In the seven months from April to October of the 2016-17 financial year, export and import activity totalling USD 1.22 billion (Rs 83.22 billion) was registered in the sector. Out of this, India imported solar material worth more than a billion dollars. This is not just because India lacks manufacturing capacity, but it is mostly because Indian modules are much more expensive compared to Chinese modules.

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