India's plan to lift curbs on solar imports to hit local production

India’s plan to lift a key trade barrier on solar modules will deliver a blow to the nation’s ambition of quickly expanding local production, according to domestic manufacturers.

Officials are considering a relaxation of rules for the next two years that restrict imports from China and other foreign producers, because local plants can’t keep up with rising demand.

The proposal risks stalling efforts by Indian companies to expand local production, a step that’s seen as crucial to meet Prime Minister Narendra Modi’s targets to both raise the use of renewable energy and encourage more manufacturing under his “Make in India” campaign. 

“Such volatile changes in government policy show that businesses can’t be dependent on policy support,” said Vinay Rustagi, managing director at Bridge To India, a renewable energy consulting firm. “It’s a dampener for domestic manufacturing prospects.” 

Module maker RenewSys India Pvt. wants to seek more clarity before pushing ahead with any expansions, and may need to reduce current output, according to Chief Executive Officer Avinash Hiranandani. 

India is aiming to install 280 gigawatts of solar generation by 2030, compared to about 64 gigawatts now, as it overhauls its coal-dominated power grid. That would require the addition of 27 gigawatts of capacity every year for the rest of the decade — more than double the volume installed last year, according to BloombergNEF forecasts.

Members of the Asean bloc of nations, which has a free trade agreement with India, could add as much as 15 gigawatts of annual module imports over the next two years, according to Rustagi. A major increase in trade with China — which previously supplied India with nearly 80% of modules — remains unlikely because of a 40% tariff imposed last year, he said.