India’s Renewable Manufacturing Continues to Face Woes despite Large and Growing Demand

Ad hoc policymaking, incompetent execution, and vested interests have ensured that India’s renewable energy manufacturing industry has never really taken off despite India being one of the largest markets for solar and wind energy. Even in the future, India will continue to remain the biggest markets for renewable energy with an investment of USD 125 billion envisaged in the National Infrastructure Plan that was unveiled recently.

The ad hoc nature of policymaking in which incentives and protections for the domestic industry are turned on and off on the whims of bureaucrats has been one of the critical issues facing the industry. The relentless Chinese manufacturing machine has ruthlessly exploited India’s institutional lethargy and apathetic nature to capture 90% of India’s domestic solar industry. The wind energy industry which had earlier given rise to a world-beating company such as Suzlon is also near its death bed. Suzlon is about to be referred to the bankruptcy court while Inox Wind is another company that should soon give up. Western manufacturers such as Gamesa and Vestas are set to capture the market once these domestic manufacturers disappear.

Vikram Solar which is one of the larger India domestic solar panel manufacturers is letting go of a large section of its workforce as the company faces multiple challenges from a slowing demand growth as well as the problems in the supply chain due to China’s coronavirus epidemic. As the Indian manufacturers never got the scale to expand, they never invested in the downstream parts of the supply chain such as cells, wafers, and polysilicon in a meaningful manner. Now, this is coming back to bite the Indian companies and the government as there is no supply of crucial components not only for the solar industry but for others such as the pharma and auto industry as well. Dependence on low-cost Chinese imports is costing the Indian industry dear.  The government needs to learn from its mistakes and form a coherent long term policy to boost manufacturing rather than just come out with ad hoc measures like import duties, incentives, etc. which come and go at the whim and fancy of politicians and bureaucrats. Without long term certainty and demand, no major industrial group is going to invest money in these times of technological disruption and trade wars.