ICRA, Energy News, ET EnergyWorld -

PLI scheme, basic customs duty to improve cost competitiveness of domestic players by 10%: ICRANew Delhi: Production-linked incentive (PLI) scheme along with imposition of basic customs duty (BCD) on imported cells and modules from April 2022 will improve the cost competitiveness of domestic module manufacturers by over 10 per cent, according to rating agency ICRA.

The scheme has been approved with a financial outlay of Rs 4,500-crore over a period of five years aimed at supporting about 21 GW of module supplies from domestic manufacturers.

“The benefits available under the PLI scheme, BCD on imported cells and modules are likely to improve the cost competitiveness of domestic manufacturers against imported modules by more than 10 per cent at the prevailing imported module prices, under assumption of backward integration up to cells,” said Girishkumar Kadam, co-group head and vice-president – corporate ratings, ICRA.

He added that given the focus on development of integrated solar module manufacturing facilities, timely selection of such projects under this scheme and implementation of the manufacturing capacities with value addition thereafter remains important to reduce the dependence on module imports.

The Ministry of New and Renewable Energy had notified guidelines for the PLI scheme to promote the domestic manufacturing of high efficiency solar modules to reduce import dependence.

“At the base PLI rate of Rs 2.25 per watt power, the PLI outlay of Rs 4,500 crore can support manufacturing and sale of about 21 GW of solar PV modules over a five-year period, translating into 4 GW per annum, at the base module efficiency specified in the guidelines and considering a full backward integration of the proposed units,” said Vikram V, sector head and assistant vice-president – corporate ratings, ICRA.

He, however, added that this remains lower than the expected annual solar PV demand of 8-10 GW in India, in the near to medium term. And in this context, the dependence on imported solar PV modules might continue in the near to medium term.

Under the scheme beneficiaries will be selected through a bidding process, with the applicants proposed to be evaluated based on the extent of integration and capacity. The criteria include minimum integration across cells and modules, minimum manufacturing capacity requirement of 1 GW, and a certain minimum level of module performance.

The PLI payable to manufacturers will be computed based on the volume of module sales, the base PLI rate subject to meeting the technical performance criteria, the tapering factor and the local value addition. The manufacturers are required to commission the units within 1.5 to 3 years from the date of sanction.

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