Loading...

Border tension with China does not augur well


22 June 2020 | BRIDGE TO INDIA

Border tension with China does not augur well

Border tension with China does not augur well

This week saw violent clashes between Indian and Chinese armed forces. 20 Indian soldiers have died in reportedly the worst clashes in the last 58 years. These events have revived longstanding distrust of China and lent an edge to the precarious relationship between the two countries. There is growing political chorus for boycott of Chinese goods and reducing trade reliance on China. The Indian government has issued instructions to seek alternate sourcing arrangements where possible. It has also accelerated efforts to promote domestic manufacturing by providing ready land and infrastructure with necessary permits to interested businesses. MNRE has constituted its own special cell to further this initiative for the renewable sector.

  • The government is keen to reduce the soaring trade deficit and growing dependence on China in critical sectors;
  • But short-term policy options to reduce Chinese module imports are limited;
  • The huge technology, scale and cost gulf between leading Chinese manufacturers and their Indian counterparts cannot be bridged through hasty decisions;

India has a massive trade deficit of about USD 50 billion per annum, up from USD 22 billion just ten years ago, with China. The government has been keen for some time to reduce this surplus through a mix of trade and non-trade barriers. Two months ago, the government even imposed restrictions on equity investments from “neighbouring countries.” There has been little real progress so far but the government stance is hardening.

For the renewable sector, the issue is straightforward but not easy: how to reduce module imports from China? India, like most other nations, remains hooked on cheap Chinese imports for 80-90% of its module requirements. The panoply of initiatives to promote domestic manufacturing over the years have failed to produce a dent on imports. Meanwhile, the Chinese manufacturers have continued to tighten their stranglehold over the global market through aggressive investments in R&D, upstream diversification and capacity addition.

Figure: 2019 module production volume of top five Indian and Chinese manufacturers, GW

Source: BRIDGE TO INDIA research

Given the lack of alternate supply sources, the policy option is straightforward – either import from China or pay 25-30% premium for domestic capacity as well as traverse the hard yards on critical infrastructure, education, labour reforms etc. To develop the whole value chain from polysilicon to modules would require a minimum 5-6 years gestation period and investment to the tune of USD 6-8 billion. In sum, it is not going to be easy to become self-reliant anytime soon. Plus, there is the risk of negative impact on project development pipeline.

The border tension has escalated the risk of abrupt policy decisions by a notch. The Indian government would do well to ignore rhetoric and realise practical limitations of domestic manufacturing aspirations. The issue at hand needs a serious deliberation with a balanced, long-term perspective.

Stuck in old times
We find it remarkable that the Indian government has launched a new scheme for commercial mining of coal. The scheme, launched as part of COVID stimulus package, purportedly aims to boost self-reliance in the energy sector. The target is to expand coal production by 225 million MT annually by 2025 with total anticipated capex of INR 700 billion (USD 9.2 billion). It is disappointing that rather than paving way for future with support for new green technologies, the government is stuck in dirty technologies.


Recent reports

India Corporate Renewable Brief | Q3 2023

India Corporate Renewable Brief | Q3 2023

This report provides an update on key trends and developments in the corporate renewable market including capacity addition, key players, policy & regulatory issuance, financing, PPA tariffs and other market trends.

India PV Module Intelligence Brief | Q3 2023

India PV Module Intelligence Brief | Q3 2023

This report captures quarterly trends in module demand and supply, import and domestic production volumes, supplier market shares, break-up by technology and rating, global market scenario, pricing trends across the value chain, key policy developments and market outlook.

India Solar Compass | Q3 2023

India Solar Compass | Q3 2023

This report provides a detailed update of all key sector developments and trends in the quarter – capacity addition, leading players, tenders and policy announcements, equipment prices, financial deals and other market developments. It also provides market outlook for the next two quarters.

Corporate RE procurement – best practices

Corporate RE procurement – best practices

Corporate consumers have access to multiple avenues to procure renewable power. Availability of various alternative procurement routes and business models has compounded the issue of consumer’s lack of awareness regarding industry best practices.

India Solar Rooftop Map | June 2023

India Solar Rooftop Map | June 2023

India Solar Rooftop Map is an info-graphic report providing a snapshot of rooftop solar market in India – capacity addition across states and consumer segments, market share of leading players and other key trends.

India Renewable Map | June 2023

India Renewable Map | June 2023

India’s total utility scale solar and wind capacity reached 101,763 MW by 30 June 2023. New capacity addition in the last 12 months was 10,099 MW, down by 26% y-o-y. Total project pipeline stands at 74,315 MW.

To top