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Budget 2022 gives solar energy a boost

Budget 2022 gives solar energy a boost

The PLI is good news as it could bring in more investments and make India more competitive.

Budget 2022 gives solar energy a boost Budget 2022 gives solar energy a boost

Going green is the buzzword and at the core of it is India getting it right on the much talked about renewable energy story. It is a high-capex foray but one that has to be made, as the rest of the world moves in that direction.

 

The target for installed solar capacity by the end of the decade is 280 GW. A host of private players are already in the game and the scout is on to raise large amounts of money. At the core of solar energy is the ability to get it right on manufacturing. The Budget took a step in that direction by allocating an additional Rs 19,500 crore through a Production Linked Incentive (PLI).


“This will be for the manufacture of high efficiency modules, with priority to fully integrated manufacturing units from polysilicon to solar PV module,” said the Finance Minister.

 

Vibhuti Garg, Energy Economist, Lead India, Institute for Energy Economics and Financial Analysis, says the government has increased the allocation under the PLI scheme for solar manufacturing after receiving a positive response for 10 GW capacity. “In fact, we expected storage and green hydrogen would receive either a budgetary or tax incentive support.”

 

According to Sidharth Jain, Managing Director, MEC+, the announcement of the scheme on solar module manufacturing is likely to bring another 40 GW of solar manufacturing. “In the previous round, more than 40GW of bids remained unfulfilled as top 3 players only accounted for the entire PLI allocation. It remains to be seen whether the cap on volume under PLI will be modified or it will go to the next set of players. If caps are removed, the PLI scheme can allow companies to reach global scale or be among the top 5 producers,” he says. 

 

There are other benefits that will flow over time. The proposal, points out Mohammad Athar, Partner and Leader Industrial Development, PwC India, to prioritise the full integration of manufacturing units into solar PV modules will encourage the private sector. They have a strong interest to invest. It will also help India to position itself as a manufacturing hub in the clean technology manufacturing space.”


As Jain puts it, the government has also notified the increase the import duty on cells and modules to 40% from 1 April 2022. “The PLI scheme will help suppliers to improve their profitability and further and add downward integration as volumes materialise,” he said.

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