Targeted initiatives and policies for scaling up the domestic solar manufacturing aligned to the RE target of 450 GW by 2030 can help in building a robust ecosystem for indigenous solar manufacturing. Saibaba Vutukuri, CEO, Vikram Solar, identifies a roadmap for achieving it.

Loan subventions. There is a need for a comprehensive policy framework that encompasses tariff and non-tariff barriers, long term financial support and direct incentives to make the domestic solar industry cost-competitive. The finance ministry should consider 5% interest subvention on term loan and working capital, upfront central financial assistance of 30% on capex, increase export incentive from 2% to 8% under Remission of Duties or Taxes on Export Product (RoDTEP) which will aid indigenous solar manufacturing.

 Basic Custom Duty. Further, the industry awaits the implementation of Basic Custom Duty (BCD) with exemption to Special Economic Zone (SEZ) based solar manufacturers and the Production Linked Incentive (PLI) scheme. In our view, bringing down Minimum Alternate Tax (MAT) for units operating in SEZs, extending Section 10 AA of Income Tax Act till 31 March 2022 for SEZ based solar manufacturing unit, preferred interest rate support and priority lending support for manufacturing units, availability of National Clean Energy Fund (NCEF) for expanding solar research and development are critical to augment domestic solar manufacturing.

Tariff barriers. Additionally, the government to consider implementing tariff barriers like BCD/Safeguard Duty/ADD for at least four to five years. Offering capital subsidy of 50% for setting up research and development and quality testing infrastructure within the manufacturing units will help build scale. Also, super-deductions of 200% of the research and development (R&D) expenditure for new and clean solar technology development should be allowed. India already offers super-deduction of 200% of the R&D expenditure in emerging areas such as biotechnology which has led to rapid growth of Indian biotech and pharma companies.

Considering the importance of the electric vehicle (EV) battery ecosystem in a solar-smart nation, special funds to be allocated for this development. Such a move will not only encourage economic recovery amidst the pandemic, but will also provide an enabling ecosystem to make India the global manufacturing hub for solar. 

Author: Saibaba Vutukuri is CEO of Vikram Solar.