State-run Solar Energy Corporation of India (SECI) has postponed, for the fourth time, its first manufacturing-linked solar auction of 10,000 MW.
The government’s earlier effort to stimulate local manufacturing of solar equipment through special auctions had run afoul of WTO rules and SECI, an arm of the ministry of new and renewable energy (MNRE), is keen not to repeat the same mistake.
“We have to be careful. MNRE has been in consultation with the commerce ministry to ensure rules are complied with,” said a government official.
SECI’s auction, for the first time, seeks to link offtake of power from solar projects to also setting up manufacturing capacity. Only those bidders will be considered who also commit to starting solar panel and module manufacturing units. Against the 10,000 MW being bid out, SECI wants at least 3,000 MW of fresh manufacturing capacity to be created. Developers can bid for a minimum of 2,000 MW, to which is linked setting up of 600 MW of annual manufacturing capacity.
“Some of the developers have asked the time allowed for setting up manufacturing facility to be extended from the current 36 months to 48 months,” said another government official who did not wish to be quoted. Developers have also requested SECI to relax penalty. These changes, however, are under consideration and SECI will take the final call, the official said.
The bid submission date has been extended three times already since the first deadline of July 27. It was then postponed to September 27, and then again to October 12. Now it is November 12. Developers have also been lukewarm to the tender since most of them do not have expertise in solar manufacturing, while setting up units would also require heavy capital expenditure, and running them would prove more expensive than simply from overseas.
But the government is keen to encourage local manufacturing since around 90% of solar panels and modules currently used in Indian projects are imported, mainly from China and Malaysia. Locally made equipment, however, is significantly more costly than imported, which is why developers prefer the latter. But this has seriously inhibited the growth of local industry. While India added around 10,000 MW of solar power in 2017-18, local operational manufacturing capacity is barely 5,000-6,000 MW annually..
When India began its solar programme about a decade ago, it had sought to encourage local manufacturers by holding separate auctions for projects where only domestic equipment could be used, called domestic content requirement (DCR) auctions. The tariffs at these were significantly higher than those where global products were allowed.
However, in 2013, the US government complained to the WTO that such auctions were in violation of the latter’s rules, since they favoured domestic manufacturers over global ones. The WTO upheld the complaint three times over, the last time in September 2016, after India kept appealing against in all possible available forums
“Why did SECI ask for bid submissions when the consultation process was not complete?” said a developer who did not want to be named.
To support local manufacturing, the Directorate General of Trade Remedies (DGTR) also recently imposed safeguard duty of 25% for a year, followed by 20% for the next six and 15% for another six on solar panels and modules from China and Malaysia.