June 22, 2016: At a time when India is focusing on renewable sources of energies to reduce power consumption and save money, the government has taken a step further by offering viability gap funding (VGF) to manufacture solar power equipment such as solar cells, solar panels, etc.
Government of India will offer projects to build solar equipment plants based on which bidder would seek the minimum amount of VGF, which is a form of funding support in order to meet the deficit in the overall project cost. The Power Ministry of India will prepare the parameters of the project together with NITI Ayog. In addition, the government will also offer guaranteed procurement of panels from the manufacturing factories set up with VGF for five to seven years.
The dual objective
By offering such funding support, the government aims to help both solar power industry and equipment industry to manufacture. Hence, they have set a 100 gigawatt target to be achieved by 2022, up from the current 6.7 GW. The project will support integrated factories where each component that goes into solar power generation is produced.
Currently, India has to depend on China and Europe to meet its solar requirements since the nation produces only 5.6GW of solar panels and 1.2GW of solar cells on a yearly basis.
Production capacity of 5-10 GW
The government is aiming to have a production capacity of 5-10 GW of solar cells per year. According to industry experts, Chinese manufacturers have the benefit of lower cost of financing over their Indian opponents. In addition, the governments reimburse the taxes for items that are meant to be exported to advance their cost competitiveness in worldwide markets. Thus, a locally produced panel which attracts central and state taxes will be less competitive as compared to an imported panel.
An industry insider pointed out that domestic panel production and photovoltaic cell industry will take some time to mature in India. With the rising requirement, the nation is likely to witness gigantic investments in the manufacturing segment which will assist India in becoming self-reliant and aid the domestic industry develop faster. Currently, most of the materials need to be imported since the domestic industry either does not produce them.