Re-Prioritizing ‘Make in India’: Need of the Hour

India saw the opportunity for growth in economic development through industrial capacity expansion and domestic manufacturing. Hon’ble Prime Minister, Shri Narendra Modi focused on manufacturing and brought forward a multi-pronged operation titled ‘Make in India’ to bring in new investments and encouragement for manufacturing growth, creating jobs, and socio-economic revolution within the country. And as expected, Make in India did attract investment, reducing knowledge curve and initiating technological growth within industrial setups. In such an environment, new and lucrative sectors like Solar, saw a bright future and possibilities for country wide improvements. But, the picture is not turning out to be that rosy.

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Support & Expectations

Make in India was supposed to work on the same lines of tried and tested strategies that have helped many countries to transform into global suppliers by focusing on their manufacturing capacity expansion. The initiative was expected to create jobs, help develop long-term policies for R&D growth, faster deployments, and build capacity in manufacturing raw materials in a value chain, to satisfy domestic demand and ultimately capture the export market of progressive sectors like Solar.

To support Make in India to turn these expectations into reality, Government of India established Special Economic Zones (SEZs) and extended special benefits like- cheap water, electricity etc. The Government also offered special benefits to lucrative sectors like Solar, namely- exemption from excise duties, 10-year income tax holiday, exemption of sales tax in certain states, payment security mechanisms to cover the risk of default by state utilities/DISCOMs etc.

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Additionally, Government also permitted 100% Foreign Direct Investment (FDI) under the automatic route for renewable energy generation.

As a result, India was able to excel in building a strong manufacturing set up in one of the fastest growing sectors like Solar. And with initiatives like Make in India running at full throttle, India stood a chance to surpass dominating solar countries like US and eventually China. However, the biggest challenges to make that happen is lack of support from Make in India.

The Current Reality

Making India a manufacturing hub can be the solution to all of the country’s woes. In fact, solar has already presented itself as a viable sector to invest in. The sector’s continuous leaps from 5 GW in 2015 to 10 GW in 2016 to ~25 GW in 2018 acts as a proof of its promising nature. And there are numerous examples where countries have become global suppliers in solar sector by focusing on manufacturing- like China. Although, Make in India could have helped India achieve a similar goal, India’s continuously growing dependency towards importing solar has removed that opportunity from equation. India spent $3.8 bn in FY 17-18 on solar module import, which has limited the progress in manufacturing capacity expansion, leading to a market scenario where foreign suppliers have claimed more than 80% share. In the same breath we need to highlight that China’s recent energy policy will lead to further fall in imported module prices, capturing demand of domestic manufacturing even more (currently Indian suppliers have less than 10% share in Indian solar market).

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Additionally, continuous drop in solar tariff, cancelation of projects, and lack of green energy distribution to the grid is scaring away the investors, making it more challenging for Make in India to succeed.

On top of that, imposition of 25% safeguard duty on SEZ based solar manufacturing units in India stands to deal a damaging blow to country’s solar manufacturing industry, as India’s 40% of Solar panel Manufacturing Units and 60% of Solar Cells Manufacturing Units are currently located in SEZs. SEZs were built to support Indian manufacturing sector, and as the growth statistics, it has. And for continued growth, more support is needed not taxes, or duties.

It is, as it seems. But there is still time to turn things around. Make in India can still serve the purpose it was built for: economic and social growth through industrial development. However, intervention is needed in different strategic and operational layers.

  • New policies are needed to address manufacturing issues regarding infrastructure, transport, taxation, power outages, labor laws, and taxation
  • Low cost finances and longer tenure loans are needed to help solar project developers
  • Investment in establishing R&D institutions is needed to support quality control and to reduce the knowledge curve
  • Reducing import dependency
  • Re-prioritizing solar and exempting it from duties, added taxes are also necessary
  • Campaigns like National Skill Development Mission are already available, Government needs to invest in them and broaden their reach to create skilled workforce
  • Extending the viability of industrial license, creating random inspection scheme, and reducing corporate tax rate by 25%-30% can aid in bringing foreign investment

Moving Ahead

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As solar continues to gain global acceptance, this is the best time for India to focus on solar manufacturing, thus making power for all a reality while becoming a global supplier of solar components. Make in India is the perfect platform to launch this growth trajectory. However, much more focus on domestic manufacturing rather than importing is needed.

It is estimated that with focus on domestic manufacturing, India can overtake EU’s renewable expansion by 2022. And that would be just the beginning for India to become an energy reliant, economically strong, manufacturing hub of the world.

 

 

Safeguard Duty on Solar to cause 30% Decline in Demand

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As one of the fastest growing economies, India decisively opted for solar development, understanding its potential to lift the country out of financial, social, and industrial darkness. The announcement of targeting 100 GW solar energy by 2022 evidently created an environment of urgency and brought forth a plethora of opportunities for industrial development. As a result, our country quickly became the second most attractive renewable energy market in the world. However, Government of India’s decision to impose Safeguard Duty on solar imports stands to undo the growth India accomplished through enhancing domestic solar manufacturing capacities. Many in the industry argue that the new policy is completely opposite of what our Solar mission and Make in India initially stood for.

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Pricing Pollution: an Approach to Support Green Energy Growth

Curbing pollution and limiting global temperature rise is a necessity now. The Paris Agreement presented a platform from where initiatives for climate protection can be mutually taken by countries of the world.

However, consider these facts –

  • Global energy supply through fossil fuels have reached from 6,100 million tonnes of oil equivalent (Mtoe) in 1977 to 13,700 Mtoe by 2014.
  • Global energy related CO2 emissions are estimated to increase at an average of 1.0% from 2012 to 2040.
  • From coal combustion alone, Asia’s CO2 emission is estimated to rise more than 2.2 billion metric tons in the future.
  • Renewable energy (mainly solar) has reduced fossil fuel share by 22 per cent.
  • 1 KW of green energy can reduce more than 3,000 pounds of CO2 annually.

We can come to a conclusion that green energy revolution is a necessity to stop climate degradation. And although it offers a reprieve from climate issues, countries working towards green energy transition is not enough to stop the spread of pollution from distorting the future of the world (dust and particulate matter (PM) may be reducing energy yield by 17-25 per cent annually in Northern parts of India and solar panels in Baghdad were seen to be producing less and less energy due to dust particles blocking the sunrays). We must take positive action towards reducing the pollution as well.

Carbon pricing or Pollution pricing can act as an efficient tool to reduce pollution, aiding green energy transition and climate restoration.

Carbon Pricing Or Pollution Pricing

Pricing pollution is quickly becoming one of the most important and promising methods of curbing pollution from the world. Business groups, investors- like The World Bank have made strides to encourage Governments and corporations to put a price on carbon to drive down emission, while speeding up green energy transition.

Why Supporting Pollution Pricing Is Necessary?

Price on carbon can shift the burden of the damage to environment and life through occurrences such as- health care costs from heat waves, damage to crops, damage to property and life due to droughts of flooding and sea level rise. By imposing tax on pollution production, these environmental issues can be reduced. The revenue generated from the taxation can be used to boost green energy transition, thus phasing out fossil fuels, which are the major contributors to pollution. This can serve as the most cost effective way of promoting climate protection and green energy generation. The carbon pricing can also support green energy market innovation through low-carbon drivers of economic growth.

Types Of Carbon Pricing

There are primarily two types of carbon pricing methods. Emissions trading systems (ETS) and Carbon Taxes.

Emissions trading systems (ETS)– are sometimes referred as cap-and-trade system, it imposes caps on the total amount of green house gas emissions and lowers the cap over time. Through this system, companies are extended emission permits. The purpose of ETS is to establish a market price for green house emission; and caps ensure that emitters keep to their emission levels, considering their pre-allocated carbon budget.

Carbon Tax– This system sets a price for carbon directly by establishing a tax rate on carbon content of fossil fuels or greenhouse gas emissions.

Depending on the economic and environmental standings, a country can select one of these components to restrict its carbon emissions. As it will promote green energy adoption, and climate betterment, carbon pricing will need additional policies for support.

  • Some of examples of complementary policies include- setting fuel/energy efficiency standards for vehicles, buildings, heating and cooling systems.
  • Offering tax breaks for energy efficiency improvements, auto feebates.
  • Setting renewable portfolio standards and mandates for having a share of renewable energy within energy mix.
  • Enforcing laws to stop de-forestation.

More than 40 countries like- The US, Germany, Chile, Brazil, and some of the EU countries have already implemented or in process of implementing these policies to support Carbon pricing.

Exceptional Examples

Estimating that carbon pricing could reduce pollution by 80 to 90 million tonnes by 2022, US states like California have introduced state-wide policies in support of carbon pricing.

Climate awareness in Canada has seen nearly 97% of its residents to commit towards pricing carbon pollution. Provinces like Quebec and Ontario in Canada have implemented cap-and-trade systems- enforcing to get permits for carbon pollution, curbing the pollution rate.

India Walking Towards Success

To support solar energy growth in India, the country is also implementing supporting policies like carbon pricing. And as a result In 2017, 40 Indian companies out of 139 companies in Asia have put price on carbon.

Government of India’s initiative towards Perform-Achieve-Trade (PAT) policy for energy efficiency, and renewable energy certificate scheme have also supported carbon pricing. World Bank and the Government of India are working together to explore a domestic carbon market in micro, small, and medium enterprises.

 

Carbon pricing provides emitters financial incentive for choosing green energy solution as it will generate energy without levying taxes. And with the world, India is working towards restoring the climate by selecting green energy and initiatives that speed up transition from fossil fuel. However, considering the rapid growth of population and pollution, world wide efforts need to be increased to see expected results.

 

https://www.canada.ca/en/environment-climate

change/news/2017/05/pricing_carbon_pollutionincanadahowitwillwork.htmlhttp://www.worldbank.org/en/programs/pricing

carbonhttps://www.carbonpricingleadership.org/what/

 

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Indian Solar Sector Needs to Focus on Sustaining Funding for Progress

Indian solar sector has shown incredible progress in the recent years. And have become INR 30,000 crore industry. The Government support has led India’s solar growth to take over the position of World’s third biggest solar market, overthrowing Japan in 2017, and increased investor interest in the industry. However, is the current fund generation status capable enough to support renewable energy goals? The question begs in-depth assessment.

Current Scenario

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It is important to note that India will need at least $125 billion to fund 175 GW renewable mission, out of which 100 GW supposed to be coming from solar. Foreign private equity investors like Goldman Sachs, Morgan Stanley, JPMorgan, European utilities EDF have shown interest in investing into Indian solar sector, while development banks like World Bank are offering financial support. Foreign direct investment in India has increased up to 17 per cent to over $25 billion, with the country focusing on industrial reforms and strengthening lucrative sectors (such as solar) recently.

However, it is important to highlight that most of the financing for renewable energy development in the country comes from domestic banks. And recent surveys indicating 65% fall in corporate funding within solar industry from Q4 2017 to Q1 2018, threatens to put constraints on solar growth in India. Currently there is quite confusion in the domestic industry regarding Anti-dumping duties, fall of solar tariff, and delays in tender auctioning; now adding lack of proper funding to the situation might reduce solar capacity addition by 40 per cent in the current financial year, which would definitely deal a severe blow to the growing industry.

With consistent growth, India is estimated to become fifth largest manufacturing country in the world by the end of 2020. And since solar has proven to be the most lucrative sector now, it is easy to understand that manufacturing solar would help India improve its industrial infrastructure, solve its energy crisis, create jobs and bring on socio-economic reform.

 

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And recent project planning of 20 GW being announced in instalments, Ministry of New and Renewable Energy (MNRE) also planning to award new project contracts in 2018. Additionally, plans for 5-10 GW of floating solar power projects auctioning in 2018, indicates India’s intension towards solarizing the country.

However, without enough funding, the growth prediction will not result into reality.

Issues with funding

We must point out here that India’s first renewable energy conference was held in 2015, where private companies committed to invest nearly $200 billion into green energy. Government of India has accepted and upheld 100% foreign direct investment under the automatic route and 74% foreign equity participation in a joint venture (without any approval). This has created the path to bring investment in Indian solar sector. India’s position in International Solar Alliance (ISA) has also made the country’s access to $1 trillion in low-cost financing for solar energy projects by 2030 possible.

Currently, around 293 global and domestic companies have committed to invest approximately US$ 310–350 billion to set up a cumulative capacity of 266 GW in (solar, wind, mini-hydel and biomass-based power) within 5–10 years. And between April 2000 and September 2017, the industry attracted US$ 12.3 billion in Foreign Direct Investment (FDI). So, it is easy to glean that Indian solar industry has become a lucrative enough market to attract funding.

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However, what is lacking is a sustainable funding mechanism that can continue to invoke interest in foreign investors.

Currently, the confusion within the industry regarding delays in anti-dumping duty imposition on foreign modules, GST, falling solar tariff, failure in meeting Renewable purchase obligation (RPO) in most states, instances of PPA renegotiations etc are scaring off investors. Blanket Safeguard Duty (recently withdrawn) had also stirred the domestic industry by imposing duties on SEZ based domestic modules manufacturers as well. It was a decisive decision by Government of India to remove the blanket safeguard duty.

However, Government of India still needs to take care of above discussed issues as they are delaying projects, and in some cases making them unviable, carving out investor’s interest. Indian solar sector has the opportunity and attention of the world to become an investment magnet by prioritizing solar industry and solving its issues that increase investor confidence.

Way Forward

Not only increasing foreign investor confidence, India needs to increase its domestic funding for solar as well. Recent news of National Clean Energy Fund being turned into GST compensation fund showcases totally opposite step than those that reflect building and supporting green energy reliance.

Although, Government of India is now actively focusing on shrinking delays in acquiring permits for construction, simplifying taxation process, and increasing skill development infrastructure, to support solar growth, more focus on raising funds is needed and would certainly help.

This Article was published in ET Energy World on 30th May 2018

Bibliography:

https://www.ibef.org/industry/power-sector-india.aspx

http://www.eai.in/ref/ae/sol/cs/spi/kc/key_challenges_in_the_growth_of_solar_pv_technology_in_india.html

https://www.thequint.com/news/environment/indian-solar-sector-funding-fell-65-last-quarter

Resource Efficiency Policies and Initiatives Can Ensure Sustainability for India

Continuously depleting natural resources pose a great threat to the world as its population continues to rise. Starvation, lack of energy, and important requirements to sustain life throughout the world has made it obvious that current consumption and production patterns are unsustainable. Focus on manufacturing and management of resources is extremely important to maintain life on Earth; otherwise the threat surrounding us would lead to further inequities. Management of lifecycle of resources, from their extraction to consumption and eventually disposal of waste has to be efficient to create and maintain sustainability of life as we know it.

Although, worldwide changes are being seen that surface necessities and align with the requirements of sustainability, not always they lead to expected results. And since managing resources is a global commitment- countries failing to create, establish and follow the process result in limiting global environment improvement. The only way to remedy the situation is cross country collaboration and development of understanding between policy and businesses within a country.

How Can Resource Efficiency Help?

Developing policies and business practices to have minimal impact on environment can also lead to adoption of resource efficient practices that can help in integrating circular economy methods. Reuse of waste would gain efficiency and responsible management system would allow countries to save millions and billions by reducing expenses and import requirement.

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Government of India’s step towards solarizing the country is indeed an inspiring and decisive step to revolutionize energy generation and usage. The country has also announced plans of embedding resource efficiency and circular economy in initiatives and polices such as- Smart Cities, Swach Bharat, Zero Effect-Zero Defect Scheme, Ganga Rejuvenation Mission, Make in India etc, which will save resources and expenses.

How Is India Working Towards Resource Management?

NITI Aayog has joined hands with European Union delegation and released strategy on resource efficiency, which is supposed to help develop circular economy that will translate into sustainable development of the country. The strategy showcases action plans involving-

  • Manufacturing capacity development
  • Institutional development
  • Sharing of best practices
  • Development of an indicator monitoring framework
  • R&D and Technology Development
  • Waste-exchange platform

These processes will support sustainable public procurement, development of industrial clusters, and information sharing & awareness generation, saving money and leading to a better developed country.

However, to operationalize strategies for resource efficiency, India needs to create and follow sectoral policies in investment, education, innovation, trade, and skills development that can support resource efficiency development.

Why Policies Are Needed?

Policies are needed to facilitate the resource efficiency processes within the management supply chain of businesses. Strategies cannot deliver result unless businesses develop resource management processes within their existing framework. In order to do that, businesses often need financial support to accept and adopt large scale efforts towards waste management and efficient resource handling. Lack of technological infrastructure also hinders businesses in following the strategies prescribed the Government. In such cases, policies facilitating support can help. It is also important to improve the economic analysis of efficient resource management.

The Way Forward

Evolving consumerism has urged rapid changes in product and service generation. India has done a marvellous job in energy generation and management by selecting solar. However, rethinking the resource management processes and effectively incorporating processes that will focus on resource usage, increasing exports, and reducing forex outflow is needed.

 

http://wsds.teriin.org/imperatives-operationalizing-resource-efficiency.php

 

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