Budget 2022 boosts allocation to solar PLI scheme by Rs 19,500 crore

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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During the Union Budget 2022-23 speech, Finance Minister Nirmala Sitharaman announced an additional allocation of Rs 19,500 crore to augment solar PV module manufacturing under the production linked incentive (PLI) scheme.

“To facilitate domestic manufacturing for the ambitious goal of 280 gigawatt (GW) of installed solar capacity by 2030, an additional allocation of Rs 19,500 crore for PLI for manufacturing of high-efficiency modules with priority to fully integrate manufacturing units to solar PV modules will be made,” Sitharaman said.

In April 2021, the government had announced a Rs 4,500 crore PLI scheme to boost the domestic manufacturing capacity of solar PV modules.

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The PLI schemes were announced to generate employment and develop domestic manufacturing. The scheme provides incentives to companies for enhancing their domestic manufacturing.

The PLI scheme for the solar sector will help as India imports most of its solar modules from China.

India’s installed solar power capacity, as of December 31, 2021, was 49.35 GW against the target of 100 GW in seven years starting from 2014-15 under the National Solar Mission (NSM), according to the Economic Survey 2021-22.

Most of the players involved in the segment—Waaree Energies, Tata Power Solar Systems, Vikram Solar, Adani Solar—are not listed. Still, renewable energy firms welcomed the announcement, as shown by the BSE Power index, which was up 1.5 percent. Borosil Renewables, which supplies glass panels for solar modules, was up 4 percent. Tata Power, Adani Green Energy, and NTPC—among the most prominent solar energy players—were up 3 percent.

The Narendra Modi government introduced the first three PLI schemes in March 2020. Sitharaman said PLI in 14 sectors could create additional production of 30 lakh crore over the next five years.

Power Minister RK Singh told CNBC-TV18 that we need to expand our manufacturing and reduce import dependence on solar equipment. “PLI is for Make in India and also to deter customs barriers for solar equipment,” he said.

The government expects to invest Rs 1.5 lakh crore in the industry and generate employment from Rs 19,500.

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As a part of the government’s overall market borrowings, India will also issue Green Bonds to mobilise resources for green infrastructure. “The proceeds will be deployed in public sector projects, which help in reducing the carbon intensity of the economy,” FM Sitharaman said.

Green Bonds will also ensure that the cost of renewable energy in the country comes down, Singh said, adding that it will enable energy transition in India as we “need funds for energy storage, green corridor phase 2, among other renewable projects,” he added.

NITI Aayog CEO Amitabh Kant told CNBC-TV18 the government had done extensive interactions across the board with all sectors in which the schemes have been launched.

“We have seen tremendous response from the private sector. Especially from the electronic and mobile sector, automobile sector, and advanced chemistry cell batteries sector. The PLI scheme enables you to become a major centre for manufacturing in these areas,” he said.

“Actually, these schemes are for a limited period of five years. So, the objective is to get the size and scale of manufacturing and to create global champions who can penetrate global markets.”

Kant said the pending textile and steel PLI schemes have been put out to the private sector for discussions, and the government expects to get their response in the next three months.

Allocation for solar modules further boosts the government’s plan for the next 25 years.

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While announcing the Budget 2022, Sitharaman said: “This Union Budget seeks to lay the foundation and give a blueprint of the economy over ‘Amrit Kal’ of next 25 years—from India at 75 to India at 100. It builds on the vision drawn in the Budget of 2021-22. Its fundamental tenets, which included transparency of financial statement and fiscal position, reflect the government’s intent, strengths, and challenges.”

She said inclusive development, productivity enhancement, energy transition, and climate action would be the four pillars of development.

In her speech, Sitharaman also announced significant allocations on the growth of renewable energy, energy efficiency, electric mobility, data centers, buildings efficiency, grid-connected energy storage, and supporting incentives for green bonds.

“The in-principle approval of PLI allocation can lead to the setting up of 30-35 GW of solar module capacity and 25-30 GW of cell capacity by 2024. This will reduce dependence on imports, which stand at 90 percent for cells and 75-80 percent for modules currently. It will make India not only self-reliant for annual module needs but also open up export opportunities for domestic module manufacturers,” CRISIL said.

“The additional outlay of Rs 19,500 crore for solar manufacturing will help the renewable industry expand rapidly. We expect IREDA, which has been capitalized recently, to move fast and issue letters of award to companies that have bid under the PLI scheme. The revocation of anti-dumping duty on steel will reduce the cost of modules considerably and ties in well with incentives for locally incorporated manufacturing entities, which can now commence manufacturing by March 31, 2024,” Sumant Sinha, Chairman and CEO of ReNew Power said.

Meanwhile, Gyanesh Chaudhary, Vice Chairman and Managing Director, Vikram Solar, told CNBC-TV18, “This (the additional PLI allocation) will strengthen the domestic solar manufacturing ecosystem, thereby, reduce our import dependence, create jobs, attract investments, and enable the Make in India vision.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow