The solar power sector is one of the thrust areas with government setting an ambitious solar target of 100 GW by the year 2022. However, the solar mission can only be successful if the domestic manufacturing sector is also developed. Currently the solar module manufacturing capacity is around 7.5 GW annually and the solar cell manufacturing capacity is around 1.7 GW. Currently 85-90 per cent of the solar module installations are from China. Such high volumes of imports lead to a forex outflow of approximately INR 20,000 Crore or USD 3 Billion. If unchecked, this is expected to increase to USD 20 Billion by the year 2025.
While some of these challenges could be addressed with non-budgetary action, we do hope the forthcoming budget will address some of these pressing issues. The Central Board of Excise and Customs has sought to reclassify imported solar panels and modules in a category that attracts 7.5% duty and various kinds of cess with the cost of a solar cell, around 30 cents at present, will go up to around 50 cents for Indian developers if 70% safeguard duty is imposed. The cost of solar power will accordingly go up to around Rs. 7 per unit. We do hope the forthcoming budget will address this issue.
We think domestic solar industry is faced with a significant loss of potential employment and innovation opportunities with manufacturing units and R&D. This could also act as a roadblock in the Make in India initiative in the power Industry. Introducing favourable policies for domestic solar manufacturing, driving innovation through R&D support in the sector, focusing on skill development - are few of the many steps that Indian solar industry drastically needs for growth.