Protect India’s Solar Makers — But Attach Conditions
India is shielding factories that run on foreign designs — and asking nothing back.
Since 1 June, a single rule has rewired India’s solar market. Every new government-backed solar project must now buy its cells from a short list of approved domestic manufacturers. Cheap Chinese cells are shut out.
Who wins, who pays: The rule — the second phase of the Approved List of Models and Manufacturers, ALMM-II — hands Reliance, Adani, Tata, Waaree and Premier a captive home market . The bill goes to developers, and through them to consumers: some estimates say consumers will pay thousands of crores extra.
Why it matters: That premium is the price of self-reliance, and it may well be worth paying. But in return for handing these companies that protected market, the government asks them for almost nothing. The mandate pays them for making cells, not for owning the technology inside them.
The catch: A factory assembling licensed Chinese cell designs on imported Chinese equipment satisfies the mandate exactly as well as one built on Indian IP — and every high-efficiency cell line in India today is the former. So we are about to spend tens of thousands of crores protecting factories that make someone else’s designs. The rule entrenches the dependence it was sold to end.
The China lesson India gets backwards: India’s whole case for no-strings support to companies rests on the belief that Beijing also did the same in the development phase. But that is not the full story.
After China joined the WTO in 2001, it had handed its own solar and EV firms cheap land, easy state credit, and flat subsidies pegged to nothing but manufacturing output. But such unconditional money produced very little results in the technology space.
In 2016 its own finance minister said unconditional money had bred a “dependency syndrome” that killed firms’ appetite for R&D. A redesign that followed tied every yuan to engineering and R&D achievements. To get state protection Chinese companies must invest in R&D and actually show results.
The fix: India should also tie each protection to a rising technology target — a growing share of protected cells must use IP developed in, or co-developed with, India.
Won’t conditions slow the catch-up? The opposite. Indian firms clear hard bars whenever the state sets them: Indian companies clear FDA standards, export auto components that require high degree of reliability and so on. If R&D is demanded of them they will deliver.
The larger point is that only a R&D mandate will catalyse a culture of innovation AND start conversations about supply chains. It may well be that the industry genuinely needs massive support to localise the solar stack - these conversations will happen when the government creates a sense of urgency.
Just three points:
1. Do you agree that if companies are importing cheap solar cells from China it is making India dependent upon their industries and killing local entrepreneurship efforts?
2. Do you prefer that Chinese Industry should profit from Indian consumers and Indian Renewable energy market instead of local manufacturers, be it Ambani, Adani, TATA or whosoever, why?
3. Can any country continue to have balance of payment issues with an adversary and still continue to promote their industrial produce at the cost of local companies and products? Will it not be advisable to increase PLI for the increase in the local output of solar cells and at the same time enforce that a certain part of the income should be cycled back into R&D for better solar power design to improve SPV efficiency, cost reduction and paneling technology robustness?
I think we must not make outsiders benefit at the cost of local industries at any cost as it will mean in the long run a negation of Atmanirbhar Bharat!!
Thanks!!