The government’s strong action towards solar manufacturing in terms of extending the safeguard duty on imports of solar panels and cells as well as plans to impose another 20% basic custom duty has forced developers to scout for indigenous manufacturing capacity to feed their plans for new solar power plants. The government has also made use of domestic solar equipment much more stringent in procurement by government departments and agencies.

However, the short term visibility of these policy actions and the past fickle nature of government rules has made manufacturers still reluctant to expand capacities aggressively. Most solar manufacturers are being careful in their investment plans and are mostly focusing on increasing the module capacity which does not cost a lot and does not require new technology. Expansion in the solar cell area has not been seen much though the Adani and Azure have committed to expand solar cell and module capacity by 3 GW as they have won the 12 GW solar linked solar plant tender. But even this manufacturing linked tender may not see the light of the day with distribution utilities reluctant to buy solar power at INR 2.92 per unit that was committed by SECI to Adani and Azure.

Tata Solar which is part of one of India’s largest and oldest conglomerates will invest in new manufacturing plant and plans to double capacity at its Bangalore plant. But the company’s CEO rightly says that he does not want to invest serious money till he sees long term visibility for his products. With Chinese companies being much larger and having better technology, it will be difficult for Indian solar manufacturers to survive in case the government takes U-turn in its policy to protect the domestic players. Tata Solar is the oldest solar manufacturer and is also one of the largest developers of solar power plants. With even Tata remaining reluctant to invest in new capacity, the smaller guys will find it almost impossible to plan and fund expansion despite the potential. India’s whole policy remains muddled and ad-hoc in nature which makes it difficult for serious players to make long term investments.