Solar sector: Cutting China dependence neither easy nor impossible

Gaurav Aggarwal, Vice Chairman, M/s. Sainik Industries Private Limited, opines that the COVID-19 pandemic is indeed a wakeup call for the solar industry as the sector has been severely impacted due to the shortage of solar components imported from China. He opines that the way to shun this import dependency on our neighbour is to start by manufacturing the less capital intensive solar components.

IBT: What impact has COVID-19 had on your solar panel business? How is it expected to impact the demand for renewable energy in the country?

Gaurav Aggarwal: Solar is a fast-growing sector in our country and we see tremendous potential there. However, just like most industries, the growth rate is impeded by the current situation. The COVID-19 pandemic is indeed a wakeup call for the solar industry as the sector has been severely impacted due to the shortage of not just cells and modules but also other ancillary products. There was restriction of work imposed on most of the COVID-19 affected provinces in China, which are hubs of solar panel manufacturing units. Off-late, India is the biggest importer of these modules as almost 80% of the solar cells and modules used in Indian projects are coming from China.

Yes, for the time being, COVID-19 has slowed down demand for renewable energy in the country, as now we are more focusing on rooftop solar projects, which are the worst impacted by COVID-19. While the rooftop sector is expected to benefit household users, COVID-19 has impacted the spending capacity of every person, whether it is  an individual or a company.

IBT: What were some of the challenges that you faced during the lockdown? Do these challenges still persist and how are you managing them?

Gaurav Aggarwal: Lockdown impacts are visible in the supply chain. Both raw material and labour were not available. Consequently, this resulted in a delay in production and ultimately a delay in commissioning of the projects.

Yes, the challenges still persist, and I think we should be ready to embrace a more severe impact of this lockdown, which will be reflected in a couple of months ahead. But like I said above, this situation is a wake up call for us – we should accept these challenges and move ahead with more possible ways out to overcome this situation of shortage of raw material. We are managing with all our available resources and trying to complete our projects on time.

IBT: How can the industry reduce India’s dependence on China for the import of solar panel components?

Gaurav Aggarwal: It seems very simple in a manner of speaking that by restricting imports from China and starting manufacturing in India, the solar industry can reduce its dependence on China for all its component requirements. But it is neither that easy nor impossible. I think it can be done certainly, but only in phased manner with complete Government support, backing and favourable policies.

We should start from manufacturing of small components to the bigger ones. As smaller components manufacturing units are less capital incentive and requires less time to setup. Once we complete this phase of small components, we should move to our next phase of bigger or core component like cells manufacturing units, which require a lot of capital. I think this standoff between India and China will definitely open new doors for Indian manufacturing industries to reduce their dependence on China.

IBT: The MNRE is encouraging states to allocate land parcels ranging between 50 and 500 acres in size in their regions that can be used to set up renewable energy manufacturing and export services hubs. What is your take on this? What impact will it have in attracting foreign investors?

Mr. Gaurav Aggarwal: Well, I think it is a good move by the Government to prioritise this sector and allocate land banks specifically for manufacturing and export service hubs. Apart from that, the government is bringing out several schemes to help manufacturers. It is an effort to meet the target of achieving 175 GW of installed renewable energy capacity by 2022. In my opinion, this step will certainly incentivise foreign investments as most of the non-Chinese companies want to move away from China due to the impact of COVID in their respective countries. This move of the Government is an open invitation to them to open their units in India in specifically allocated land banks.

Apart from that, foreign investments in commissioning projects will prove to be saviours for project owners who are the worst affected due to this pandemic. COVID-19 led economic slowdown is expected to affect solar project installations in the first half of the current financial year and the sector is only likely to start recovering in the second half. 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. This will alter the working capital cycle of the solar industry with deferred payments.

IBT: How will COVID-related disruptions impact India’s progress towards meeting its 175 GW renewable energy goal?

Mr. Gaurav Aggarwal: Overall, the solar industry has been considerably affected due to the COVID-19 outbreak with issues like cash flow crunch, recovery of payments from distribution companies, working capital requirement, workforce availability and mainly supply chain disruptions. The rooftop solar segment will be adversely affected as these are small-size firms and lack the economic capacity to absorb losses.

The government’s approach towards this situation has been quite positive to limit the negative effects on the sector. It will largely depend on how the industry bounces back once normalcy is restored. So far, we can say that FY 2021 will see week commissioning in Q1 and Q2. There is a project bunch up, but resolution of policy issues, availability of land and timely execution will determine future growth.

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Gaurav Aggarwal is a Chartered Accountant and Company Secretary. He is the Vice Chairman of M/s. Sainik Industries Private Limited and he is in the business for last 11 years.

M/s. Sainik Industries Private Limited is a trusted name in the business of Solar products. They are executing various Government contracts related to Solar Rooftops, Solar PV Home lighting systems, Solar Street lights and EPC contract of Solar Power plants on PAN India basis viz. Assam, Uttar Pradesh, Bihar, Uttarakhand, Jharkhand, West Bengal and many more.