Coronavirus crisis will affect India’s solar industry to the tune of ₹16,000 crore

• Paucity of solar imports could affect Indian solar industry to the tune of ₹16,000 crore, accounting for 3GW of solar installations.
• Cash flow crunch and reduced power consumption could impact small-size solar firms despite the government’s and RBI’s support measures.
• The Coronavirus crisis could also have an impact on India’s ambitious target of 100GW solar energy by 2022.

The Coronavirus crisis has had a major impact on India’s solar industry and its ambitious target to install 100 giga watt (GW) solar energy by 2022. As of January 2020, India installed 35GW and without fast paced installation, it is very likely to miss its 2022 target.

According to a CRISIL report, the Coronavirus crisis will likely affect India’s solar industry to the tune of ₹16,000 crore, or 3GW.

India imports 80% of its solar modules from China

India’s excessive reliance on China for its solar energy ambitions could prove to be costly, or at the very least, impact its target capacity installation.

According to the Union Minister for New and Renewable Energy (MNRE) RK Singh, India imported $1.18 billion (around ₹8,850 crore) worth solar modules from China during April-December 2019.

“The solar panels or modules imported from China are generally cheaper than those produced by domestic manufacturers,” Singh said.

Solar power returns might be affected. “In a bid to meet the commissioning timelines, the developers may choose to implement projects with more expensive modules sourced from locations other than China. But this could erode returns as the modules may be 15-20% costlier, shaving as much as 3 percentage points off their returns,” the CRISIL report added.

Government steps in to offer relief

Taking note of the impact of Coronavirus on the solar industry in India, the government has stepped in to offer relief. It has declared this crisis as a force majeure situation, allowing solar developers to justify delays if their supplies have been affected by Coronavirus.

“The pandemic is expected to affect solar project installations in the first half of the current financial year and it is only likely to start recovering in the second half,” said a report in ORF.

“The industry usually completes most of the projects before the monsoon season; however, most of these projects will now be initiated only after about six months,” the report further added.

RBI’s 3-month moratorium will help small firms in managing cash flows

RBI’s 3-month moratorium on term loans should also help firms whose cash flows have been impacted. The ongoing Coronavirus crisis has led to a steep decline in power consumption. In the first ten days of the lockdown, power consumption declined by 26%, according to an ET Energyworld report.

Lower demand will affect the viability of small-size solar firms – although RBI’s 3-moratorium gives them temporary relief. Not only will their finance costs will increase as lenders will continue to charge interest, cash-crunched discoms will buy less of the ‘costlier’ solar power.

The government ‘promises’ purchase of solar power, and as per its regulations around 15% of the basket of power purchased by discoms should include renewable power. But few states bother to heed to the mandate.

States like Punjab and Uttar Pradesh stated their inability to do so. Madhya Pradesh and Andhra Pradesh have cited lack of funds.

MNRE taking steps to reduce India’s over-reliance on solar imports

But as of now, the biggest hurdle to capacity addition is still over-reliance on solar imports. The ministry urged states and ports to identify land to set-up manufacturing facilities for solar equipment.

“Apart from the domestic needs, there are good opportunities for Indian solar equipment manufacturers to export their products to South Asia and Africa which are upcoming RE markets,” the ORF report added.

See also:

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