Adani Becomes Cost Uncompetitive Even Before Starting Its New 1200 MW Solar Factory

India’s Adani Cost Uncompetitive Already

The Indian manufacturing companies have not been successful despite pouring in a lot of money to build almost 5000 MW of solar modules capacity in the country. They don’t have an edge either in costs or in technology. Their products are way costlier than what is produced in China and that makes them dependent on government dole to keep their factories running. Even the large players are nowhwere near the Chinese costs. The biggest problem is the lack of sufficient scale and lack of a domestic ancillary supply chain to feed these factories with the necessary raw material at a sufficiently low cost. The technology of these companies are also not great as they buy the equipment from Japanese and German suppliers, who do not provide them good technology at sufficiently low capital costs. Chinese makers on the other hand, have become adept at making equipment themselves in China at a fraction of the western equipment suppliers.

The Adani group had entered solar manufacturing with much fanfare last year, promising to build an entire supply chain form polysilicon to solar panels. They had initially started out by building solar cells and panels at Mundra near their super large port.  This 1200 MW facilitiy is supposed to come online by December this year. However, even before starting their factory, their CEO has given up on competing with global players saying that their costs will be 10-15% higher. What is the use of building a factory with 10-15% higher costs in a wafer thin margin industry. With even top companies making just 15% gross margins, this means that the Adani solar panel making factory will be in the red from the first day. Though it may breakeven by supplying panels under the DCR content which its parent might have won in the past, this is not sustainable given that WTO has made DCR illegal in India. While the government has announced a massive $3 billion subsidy program for solar manufacturing, it remains to be seen how well that is executed.

It is strange why the Adani group which is into building of infrastructure projects such as ports, power plants etc. went into making of solar panels when they could have easily bought this equipment from outside as it normally does. While the factory may run because the Adanis have one of the biggest pipeline of solar projects in the country and will find an inhouse captive consumer for the solar panels being manufactured, it would have been better for the group to not enter the space as it does not have sufficient skills nor capabilities in this space.

BHATINDA: Adani Group’s made in India solar modules and solar photo-voltaic cells prices will be around 10-12 per cent higher than the imported versions available in the market, Adani Group Renewable Energy Business CEO Jayant Parimal told ET. The Group is set to commence manufacturing facility of the solar equipment of 1200 MW by December this year at Mundra.

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