MNRE has added three new companies – CEL (module manufacturing capacity 35 MW), Patanjali (70 MW) and Jakson (80 MW) – to the Approved List of Models and Manufacturers (ALMM). Total approved module capacity now stands at 8,350 MW among 26 Indian companies. The first list with 23 companies was released in March 2021. No foreign manufacturers or even domestic cell producers have been approved as yet.

• All solar power projects awarded under government tenders with bid submission deadlines falling on or after 10 April 2021 must use only ALMM-listed cells and modules;
• Lack of sufficient domestic manufacturing capacity poses risks to generation capacity prospects;
• In view of BCD and other support measures announced by the government, ALMM seems an unnecessary hurdle;

To recap, the ALMM policy mandates that all solar power projects awarded under central, state or PSU tenders with bid submission deadlines falling on or after 10 April 2021 are required to use cells and modules approved as on the date of invoice. There is, however, inconsistency in implementation. Some tenders like REMCL 210 MW and MSEDCL 500 MW stipulate that modules may be approved by COD but other tenders (NHPC, GSECL) specify that modules must be approved as on bid submission date.

The delay in approval of foreign manufacturers was so far perceived to be because of delays in organising factory visits and documentation owing to COVID. But the Union Power Minister RK Singh has clarified the government’s intent with an extraordinary statement – “If you want to sell in India, you will have to set up manufacturing here. If you don’t set up manufacturing here, I can give it to you in writing that you will not qualify for entry into that approved list of models and manufacturers.” It is a shocking statement in many respects and shows that the government is prepared to go all out to promote domestic manufacturing even if at odds with stated policy and accepted international trade norms.

The Minister’s statement raises some disturbing questions. There is simply not enough domestic manufacturing capacity – India produced only 5,383 MW modules in the last 12 months as against average annual expected demand of about 16,000 MW. Many companies have shown interest in setting up or expanding current production facilities but this is going to take minimum 3-4 years particularly for cell capacity (about 80% deficit). Any constraint in module supplies would directly hurt generation capacity addition outlook. There is significant procurement risk ahead for developers. We expect that the government would ultimately relent and either give more time to developers for project completion or relax ALMM implementation timelines.

Besides, when the government is already proposing a massive tariff barrier (40% BCD on modules from April 2022 onwards) plus financial incentives for domestic manufacturers, what is the need for ALMM? Complete blockage of imports seems unnecessary and betrays lack of confidence in competitiveness of domestic manufacturing.

Figure: Other government measures to promote domestic manufacturing

A complete ban on imports would also be in contravention to international treaties and faces the risk of tricky trade disputes. India cannot hope for a thriving domestic manufacturing sector without a consistent, transparent and open regime for international trade.