Reviving Local Solar Industries: India Reimplements Import Restrictions on Solar PV Modules

Recently, the government of India has been extensively aiming at boosting domestic production and sourcing of solar modules to enhance India's renewable energy manufacturing. This follows an order from the Ministry of New and Renewable Energy (MNRE) on March 29, which reinstated the 2021 notification of the 'Approved List of Models and Manufacturers of Solar Photovoltaic [PV] Modules', commonly known as the ALMM list. This list had been put on hold for two years before this recent re-implementation.

But what is the Approved List of Models and Manufacturers of Solar Photovoltaic Modules, and why was it reactivated after a two-year hiatus? Additionally, how did China emerge as a leading supplier in the solar PV module market? Let’s learn and understand more about it in detail.

What is the ALMM List?

The Ministry of New and Renewable Energy (MNRE) has mandated the registration of solar module manufacturers under the Approved List of Models and Manufacturers (ALMM) in an effort to decrease India's reliance on imported solar products and promote self-sufficiency.

The Approved List of Models and Manufacturers (ALMM) comprises the list of manufacturers eligible for government projects and initiatives in India.

Initially issued in 2021, it was suspended due to dependency on cheaper, imported modules, primarily from China, and has now been re-implemented.

This re-implementation supports the growth of India’s domestic solar manufacturing under newer economic conditions and policies.

Currently, the ALMM includes 78 registered manufacturers, with the list being periodically updated based on requirements.

The Role of Imports in India’s Solar Sector

India heavily relies on imports for solar cells and modules, with China and Vietnam being the primary sources.

The Minister for New and Renewable Energy reported to Parliament in February of the previous year that over the past five years, India imported approximately $11.17 billion worth of these products, accounting for 0.4% of the nation’s total exports during that period.?

Data up to January 2023-24 from the Ministry of Commerce’s Import-Export database revealed that 53% of India's solar cell imports and 63% of solar PV modules were from China.

A report by ratings agency ICRA noted that China holds over 80% of the manufacturing capacity for polysilicon, wafers, cells, and modules.?

However, the Production Linked Incentive (PLI) scheme is expected to bring about significant changes, with the development of integrated module units anticipated within the next two to three years.

Policy Responses to Enhance Local Manufacturing

India has taken three major steps in the last five years to lessen its reliance on imported solar products. Initially, it issued the ALMM order in January 2019, which gained prominence during the global supply disruptions caused by the COVID-19 pandemic. India has introduced the following strategies for the course:

Production Linked Incentive (PLI) Scheme: Finance Minister Nirmala Sitharaman introduced a ?19,500 crore Production Linked Incentive (PLI) scheme in the 2022-23 Union Budget to boost the entire domestic solar manufacturing chain, from polysilicon to solar modules.

Custom Duties: Introduction of significant customs duties on imported PV modules (40%) and cells (25%), though these were later reduced due to the impact on project costs and tariff quotations. This was done to balance development costs and project pricing.

These policies aim to reduce imports and stimulate local production capacities, projected to expand in the coming 2-3 years.

China’s Dominance in Solar Manufacturing

According to a July 2022 report by the International Energy Agency (IEA), China is the most cost-effective location for manufacturing all components of the solar PV supply chain.?

This cost advantage is largely due to the low electricity prices in China, which represent over 40% of the production costs for polysilicon and nearly 20% for ingots and wafers.?

The IEA also noted that Chinese government policies have strategically prioritized solar PV, fostering economies of scale and ongoing innovation across the supply chain.

Solar Power Potential in India

The government of India targets 500 GW of capacity from non-fossil sources by 2030, emphasizing the significant role of solar energy.

India leads major economies in the growth rate of electricity demand through 2026, driven by robust economic activities and the increasing use of products to combat severe weather conditions

The nation is experiencing rapid growth in electricity demand due to economic expansion and climate-related needs.

With an estimated solar power potential of 748.99 GW, India is working on harnessing this capacity through various government schemes and initiatives.

These measures and developments signify a strategic shift towards enhancing domestic capabilities while addressing the challenges posed by import dependencies in India's solar sector.

Conclusion

In conclusion, India's current reliance on imports for solar cells and modules, predominantly from China and Vietnam, underlines the necessity for enhancing domestic manufacturing capabilities to meet growing energy demands and sustainability goals. By investing in the entire solar supply chain and leveraging policies that encourage local production, India aims to not only become more self-reliant but also to position itself as a leader in renewable energy on the global stage. Let’s make India green and self-reliant together!