Solar News & Trends

A Brief Explanation of PLI Scheme for Solar

By : pixon April 27, 2021
The Solar Industry is booming in India regardless of the Covid situation with the help of the Indian Government. We’ve witnessed various initiatives to enhance solar installations pan India, be it for rooftop, large scale ground mount projects or even the decentralized installations. The government is also strategically focusing on the Aatmanirbharta for solar. To execute this, various schemes such as CPSU Scheme Phase-II (12 GW), PM- KUSUM (20.8 GW) and Grid-connected Rooftop Solar Program Phase-II (4 GW) mandate the use of domestically manufactured Solar cells & Modules. The imposition of BCD on Solar Cells, Modules, Inverters & Lamps also plays a major role in creating a demand for domestic manufacturing. Although the path might seem to be difficult to some, it is going to be highly beneficial for the nation when we reach that stage.
At a webinar for consultation towards implementation of Union Budget provisions in the power and renewable sector, PM Modi said, “We want to see our companies become global manufacturing champions, not just fulfill local demands. The government’s approach for the energy sector is guided by four R’s: reach, reinforce, reform and renewable. For reach, last mile connectivity is needed. This reach needs to be reinforced by installation capacity, for that reforms are needed. Along with all this renewable energy is the demand of the time”
The most recent scheme to advance the Make in India drive for solar is the Production Linked Incentive (PLI) scheme. The cabinet approved the PLI scheme proposed by the Ministry of Renewable Energy (MNRE) for the “National Programme on High Efficiency Solar PV Modules”.

What is the PLI Scheme for Solar?

The PLI scheme focuses majorly on aiding the domestic manufacturers to provide high efficiency modules that can stand out not just in the local, but the global market as well. The cabinet has also approved an outlay of ₹4,500 Cr. under this scheme.

Key Points:

Companies registered in India that are involved in manufacturing solar products can apply under this scheme. The applicants must meet the threshold criteria i.e. ₹10 cr. (MSME), ₹100 cr. (Others) and a maximum of ₹1000 cr. to be eligible for the disbursement of incentive. To meet these criteria, cumulative investment over the base year (2019-20) shall be considered. Additional expenses borne by the companies for machinery, R&D, and likewise will be eligible for the scheme. Companies will be selected through a transparent competitive bidding process. PLI will be disbursed for 5 years after the commissioning of the solar plants. The amount of PLI will increase as per the efficiency of the modules offered by the company. Companies sourcing domestic raw materials for their manufacturing will also be benefitted more. The domestic manufacturers are stirred up with the news and await MNRE to offer more clarifications and crisp guidelines to enact the scheme. There is a buzz that the government is planning to start the first round of bidding in a very short term.

Advantages of the PLI Scheme

It is expected to add 10,000 MW capacity of integrated solar PV manufacturing plants. It will bring about 30,000 direct and 1,20,000 indirect employment opportunities. It will create a direct investment of around ₹17,200 cr in solar PV manufacturing projects. The PLI scheme will also create an import substitution of over ₹17,500 cr every year. It will also encourage R&D for high efficiency solar PV modules. It will create a demand of ₹17,500 cr for ‘Balance of Materials’ in the upcoming five years.

But is this enough to boost Domestic Manufacturing?

This question beats up many in the solar industry as there are stats offering a story buildup. As per MNRE, India’s Solar cell and Module manufacturing capacity is 3GW and 10GW respectively. We rely almost 80% on the foreign imports to meet our local demand due to the cost variation. But the imposed BCD will now make foreign imports high in cost as well wef April, ‘22. The move will surely reduce the import dependency, but it will not be an easy path for India to become a global player in the Solar industry. It is a sure shot to boost the Indian manufacturers but there are various factors to be taken into consideration. The government also needs to offer other incentives to integrate the complete demand-supply value chain.