The Indian Finance Ministry has rejected a proposal by the Ministry of New & Renewable Energy for a financial support program from domestic solar equipment manufacturers.

Indian business daily Economic Times has reported that the Ministry of Finance has refused to approve a Rs 20,000 crore ($3.1 billion) relief package for the solar cell and module manufacturers. The Ministry of New & Renewable Energy had proposed this incentives program in order to help Indian companies compete with foreign manufacturers.

Under the proposed scheme, the government plans to have a manufacturing base of 5 GW by 2019. With the capital cost support the government hopes that these products will be able compete with cheaper modules from China and the United States.

Over the last few years, imported solar modules have gained an overwhelming share in India’s solar power market leading to a massive crash in the tariff bids. Several project developers have signed large deals with Chinese module manufacturers in order to make good on their low tariff bids.

According to the Ministry of New and Renewable Energy, India imported 161.5 million solar panels in financial year 2014–15. Of these, 113.5 million panels, or 70%, were imported from China. This marked a significant increase from the 65% share of Chinese modules in financial year 2013–14. Of the total 154.1 million panels imported that year, 100.4 million came from China.

The Indian government increased solar power capacity target by five times hoping that it would create a market bug enough for co-existance of domestic and foreign module suppliers. The government even set separate quotas for projects that could use only Indian-made modules. However, this policy did not conform with international trade regulations, the World Trade Organisation (WTO) found.

The Indian solar power sector is thriving well with project developers willing to set up projects at tariffs lower than those of coal-based power plants. The government, possibly rightly, does not see any reason to interfere and disrupt the market in any way. An additional $3 billion financial burden is certainly not something the government would like on its books.

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