India aspires to be one of the world's largest producers of solar power under the Solar India mission overseen by the Prime Minister.
According to a study by consultancy KPMG, the Indian solar sector has the potential to attract $110 billion investment by 2022, meet 7% of the country's total power requirement, create 1million direct jobs and avoid coal imports of $5.5 billion.
According to sources, apart from the pricing power, the Chinese vendors offer suppliers' credit, posing tough competition. There is no tariff protection for solar equipment makers, as import duty is nil. Chinese suppliers have been aggressively pushing their products in overseas, holding 65% of the global solar power equipment market.
The government provides subsidies for solar power. Developers, however, prefer cheaper Chinese equipment as it helps them quote competitive tariffs and win projects under competitive bidding.
Indian suppliers are now bonding together to face the emerging threat. "We will form an association to make our voice heard," Dhruv Sharma, chief operating officer, Jupiter Solar Power Ltd, a solar power equipment major, said. "At least 20 solar power equipment manufacturers including Moser Baer, Indosolar, Euro Multivision, Websol, Vikram Solar, Modern Solar, HHV and Solar Semiconductor have agreed to join," Sharma said.
While the Jawaharlal Nehru National Solar Mission (Solar India) envisages adding 20,000 MW capacity by 2022, states are also adding capacities on their own.
Indian manufacturers are unhappy with the prevailing duty structure and want a level playing field. "While import duty on equipment is nil, we have to pay excise duty on components, which are unrecoverable as the final product is duty-free," Prasanth Sakhamuri, chairman, HHV Solar, said.
"That puts the local industry at a disadvantage vis-a-vis imports," Sakhamuri said.
Even overseas players who have set up manufacturing facilities in India are seeking protection. "If India does not want to see the solar industry dominated by the Chinese, it must work at creating a level playing field," Larry Holmberg, CEO and president of Solar Semiconductor, a Canada-based firm which has set up operations in India, said. "I believe India has the opportunity to rapidly become a key play in the global equipment industry in five years. But the government must move quickly to provide support and incentives to the local industry," he said.
"The government needs to nurture this industry which is in its infancy. Indian money (subsidy) should be used to generate local employment," Sharma said. Some 15,000-16,000 people are employed by the local industry.
One out of five stalls at the recent 5th Renewable Energy India 2011 Expo in New Delhi were put up by Chinese vendors. There are more than a dozen Chinese companies with individual manufacturing capacity of over 1,000 mw. In contrast, the combined capacity of Indian manufacturers does not add up to 1,000 mw, an industry expert said.
Source- Financial Express