The ‘import restrictions’ on solar PV cells

The ‘import restrictions’ on solar PV cells

Subject: Economy

Section: External Sector

Context:

• The Ministry of New and Renewable Energy (MNRE) on March 29, ordered to re-implement its 2021 notification of an ‘Approved List of Models and Manufacturers of Solar Photovoltaic [PV] Modules’, also called the ALMM list.

What is the ALMM list? Why is it being re-implemented?

• The Approved List of Models and Manufacturers (ALMM) includes manufacturers approved for involvement in government projects and initiatives, especially those related to renewable energy, like solar power.
• The ALMM was temporarily paused two years after its introduction due to concerns from renewable power producers.
  • These producers, having secured sale contracts with the government prior to the list’s establishment, relied heavily on imported solar modules and cells from China due to their affordability and the domestic sector’s inability to meet demand at competitive prices.
• This move aims at promoting import substitution to support the domestic industry, rather than restricting imports outright.

Does India rely on solar PV imports?

• India significantly depends on imports to fulfil its solar cell and module requirements, with China and Vietnam being the primary suppliers.
• Over the past five years, India imported solar cells and modules worth approximately $11.17 billion, constituting 0.4% of India’s total exports during this period. As of January 2023-24, China was responsible for 53% of India’s solar cell imports and 63% of its solar PV modules.
• The manufacturing capacity in China is dominant across the solar supply chain, while India’s capacity is limited and mainly focused on the final stage of manufacturing.
• Initiatives like the Production Linked Incentive (PLI) scheme aim to expand India’s manufacturing capabilities in the coming years.
• In response to this reliance on imports and global supply chain challenges, especially highlighted during the COVID-19 pandemic, India has implemented key policies to bolster domestic production. These include the introduction of the Approved List of Models and Manufacturers (ALMM) in January 2019, the announcement of a ₹19,500 crore PLI scheme in the 2022-23 Union Budget to enhance domestic manufacturing across the solar supply chain, and the imposition of a 40% customs duty on PV modules and a 25% duty on PV cells.
• These duties were later reduced to address the slowdown in solar capacity additions and the financial pressures faced by projects relying on imported Chinese equipment, which were bid at competitively low tariffs.

Why is China a leading exporter?

• China is the leading exporter of solar PV components primarily due to its cost-competitive manufacturing environment. The lower cost of power, which is a significant part of production costs (over 40% for polysilicon and nearly 20% for ingots and wafers), plays a crucial role in this advantage.
• Additionally, the Chinese government’s strategic prioritization of the solar PV sector, combined with substantial domestic demand, has facilitated economies of scale and continuous innovation throughout the supply chain.

What is the scope for solar in India?

• India’s ambitious goal to achieve 500 GW of installed capacity from non-fossil fuels by 2030 significantly drives the potential for solar power expansion. The country is experiencing the fastest growth rate in electricity demand among major economies up to 2026.
• This surge in demand is attributed to robust economic activity and the increasing consumption of products designed to counter extreme weather conditions. 
• Solar energy contributed to approximately one-third of all renewable energy production between April last year and February this year. With an estimated solar power potential of 748.99 GW, India has yet to fully exploit this resource.

Source: TH