According to a report by the Global Trade Research Initiative (GTRI), India’s ambitious goal of installing 500 gigawatts (GW) of renewable energy by 2030 could lead to annual solar equipment imports reaching approximately $30 billion, increasing reliance on Chinese products.
The report highlights that developing a self-sufficient solar manufacturing sector in India will necessitate substantial investment to establish an integrated supply chain, particularly in areas such as polysilicon and wafer production. Without these advancements, India may continue to encounter high import costs while struggling to achieve its renewable energy targets.
In the 2023-24 fiscal year, India added 15 GW of solar capacity, bringing the total to 90.8 GW by September, a significant increase from just 2.8 GW in 2014. To meet the government’s goal, the country must ramp up installations to 65-70 GW annually, with over 80% of this capacity expected to come from solar power.
The report states, “This target seems ambitious, particularly given India’s reliance on imports, which could push solar imports to $30 billion each year.” In the current fiscal year, solar equipment imports reached $7 billion, with China supplying 62.6% of this total.
China holds a dominant position in the global solar market, controlling 97% of polysilicon production and 80% of solar module manufacturing, making it challenging for India to compete due to lower prices.Ajay Srivastava, GTRI’s founder, pointed out that while initiatives like the production-linked incentive (PLI) scheme aim to bolster local manufacturing, their impact is limited because they heavily rely on imported components.
The report indicates that India’s solar manufacturing industry is still in its infancy, with most projects depending on imported ready-to-use modules. Last fiscal year, imports of ready-to-use solar modules totaled $4.4 billion, with additional imports of $1.9 billion for solar cells and $1 billion for essential components like inverters and cables.
The report also notes that local production is heavily reliant on imports and primarily focuses on the final assembly stages. Approximately 90% of solar manufacturing in India involves assembling modules from imported cells, resulting in only 15% local value addition.
To reduce import dependency, India needs to start producing solar cells from scratch using silica sands, a process that requires expensive and energy-intensive polysilicon production and advanced technology. The report underscores the need for local production of materials like aluminum frames and glass, which will demand significant research and development efforts alongside government support.
In 2023, China emerged as India’s largest supplier, providing $3.89 billion worth of solar cells and modules, followed by Vietnam ($1.02 billion), Malaysia ($549.8 million), and Thailand ($248.8 million). While India has imposed customs duties of 40% on solar modules and 25% on solar cells to decrease reliance on Chinese imports, products from Vietnam, Malaysia, and Thailand are exempt from these tariffs under the India-ASEAN free trade agreement, as long as they add at least 35% value to the imported inputs.
The think tank has proposed seven strategies to enhance domestic manufacturing and reduce imports, including encouraging investments in the entire solar production chain, from raw materials to finished products.
There is also an urgent call to build local production capacity for essential materials and expand the PLI scheme to cover early-stage solar manufacturing while providing targeted subsidies to attract private investment.
GTRI suggests India should collaborate with the US, EU, and Japan to establish large-scale solar manufacturing facilities, creating a robust and independent solar industry. Furthermore, it recommends reassessing current import duties to support local manufacturing without imposing higher costs on consumers.
The report by GTRI emphasizes that the global transition from fossil fuels to renewable energy, led by the US, EU, Japan, and India, will heavily rely on solar power, which constitutes a significant portion of the renewable energy mix in many countries. China’s dominance in global solar production, accounting for over 80% of output and controlling 97% of polysilicon supply, highlights the need for a strategic shift in India’s approach to solar manufacturing.
