Loading...

Government no closer to unlocking the manufacturing puzzle


03 September 2018 | BRIDGE TO INDIA

Government no closer to unlocking the manufacturing puzzle

SECI has made several amendments to its RFS for the integrated project development and module manufacturing tender. The big change is reduction in manufacturing capacity from 5 GW to 3 GW. MNRE received strong representations from the private sector with most companies not happy with the integrated tender design or with the ratio of project development and manufacturing capacity. Accordingly, focus on manufacturing has been reduced – revised minimum bid size is 2 GW of project development capacity combined with 600 MW of module manufacturing capacity.

  • The tender conditions are highly restrictive and complex;
  • Although there is no operational links between manufacturing and project development aspects, there are cross-penalties for delays and/ or underperformance;
  • We believe that this is the wrong formula for supporting domestic manufacturing;

Unfortunately, not all changes are positive. Ceiling tariff has been revised downwards to INR 2.75 (US 3.9 cents). The manufacturing capacity still needs to be fully integrated from polysilicon onwards but is required to be fully operational within 2 years as against 3 years under the original RFS. The requirement to locally source all major raw materials, other than polysilicon, has been relaxed but new restrictions have been included for capacity utilisation (50-60% in the first two years) and technology (module efficiency must be minimum 19-20%). Time period for development of project capacity has also been reduced from 4 years to 3 years – 40% capacity should be operational within 21 months and balance 60% should be operational in another 15 months.

Overall, it remains a peculiarly designed tender with a very complex structure. Although there is no operational connection between manufacturing and project development, there are cross-penalties for delays and/or underperformance.

The rationale for the peculiar tender design is that developers can, in theory, bid extra tariff on generation to subsidise their investment in the relatively unattractive manufacturing business. But that logic is defeated by the government’s general unwillingness to accept higher tariffs.

Moreover, few players have the willingness and capacity to participate in a tender of this scale/ complexity. Other concerns for potential bidders include large minimum investment of about INR 90 billion (USD 1.3 billion), aggressive time scale for implementation and weak market outlook for module manufacturing business. Several developers and module manufacturers are exploring joint-venture possibilities but the challenges are still formidable.

It is difficult to see how proposed revisions would attract enough bidding interest. We believe that the government is tying itself into knots and a solution to promote domestic manufacturing remains way off. Another pre-bid meeting is scheduled for September and we suspect more revisions are in store.


Recent reports

India Renewable Compass | Q1 2024

India Renewable Compass | Q1 2024

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.

India PV Module Intelligence Brief | Q1 2024

India PV Module Intelligence Brief | Q1 2024

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

India Corporate Renewable Brief | Q1 2024

India Corporate Renewable Brief | Q1 2024

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.

Corporate renewable market -alternative procurement options

Corporate renewable market -alternative procurement options

Corporate consumers seeking to increase share of renewable power in their consumption mix have the option of using multiple short-term procurement routes like green power exchange, renewable energy certificates (RECs), I-RECs and green tariffs.

India Solar Rooftop Map | December 2023

India Solar Rooftop Map | December 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. Total rooftop solar capacity is estimated to have reached 14,484 MW by end of 2023. Total new installations in 2023 are estimated at 2,856 MW, up only 8% over previous year.

India Solar Map | December 2023

India Solar Map | December 2023

India Solar Map 2023 is an info-graphic report covering growth of utility scale solar sector – national and state-wise commissioned and pipeline capacity, leading market players and portfolio details of top 16 project developers. Capacity addition in 2023 fell 51% YOY to 5,924 MW taking total utility scale solar capacity to 59,840 MW. Total project pipeline stands at a record 74,161 MW.

To top