Can India reach the global top spot in solar? The govt does not have the deep pockets, or even the inclination, to fund a massive expansion in renewables

When the Indian government started talking about the 100-gigawatts-by-2022 solar target, it seemed intriguing that a 600-megawatts (Mw) solar auction in Turkey last year had generated more excitement in international investor circles than this astonishing number. One of the reasons is that the 100 gigawatts (Gw) is seen as an aspiration rather than a target. If indeed it is a serious target, where is the action plan for implementation? Who are the investors? What are the incentives on offer?

It is true that countries have gone from almost nil installation to 1 Gw in as little as one year - for instance, Romania - or even built many gigawatts in a single year. China installed 12 Gw of solar last year - but it has been on the back of generous incentives. India's power minister Piyush Goyal has been saying that incentives would in fact be rolled back. Renewables need to be a "self-sustained industry and not dependent on government subsidies," he said at an industry meet last month.

India currently adds roughly 1 Gw of solar photovoltaic capacity every year. At this rate, it would take a 100-odd years to reach the targeted installations unless the annual rollout is enhanced to 12 Gw. Is that doable? Can India's grid support that?

In 2014:

China has an installation target of 14 gigawatts   Japan is likely to add 10-12 gigawatts   India would add a little over 1 gigawatt   Bloomberg New Energy Finance expects total global installations of 46-50 gigawatts, versus 40 gigawatts in 2013

King China

 

 

China boasts the world's largest market by installations currently, and has a stretch target of building 14 Gw of solar this year. Given that it has added a little over a quarter of that in the first nine months of the year, there is speculation that it could slip, yielding the number one position to Japan, which is set to add anywhere from 10-12 Gw, according to our data.

China has managed to sidestep the constraints of its grid somewhat by relying on what are referred to as distribution-grid-connected projects as distinguished from transmission-grid-connected projects. Elsewhere, the former are typically small rooftop projects, but in the case of China, most of these projects are over 1 Mw in size, and located on roofs of industrial and commercial properties.

India may be considering a similar distribution-grid-connected solution since high commercial tariffs in some states already make solar power competitive with grid power. As much as 40 Gw of the 100 Gw are expected to come from rooftop solar projects, according to government officials.

Make-in -Brazil please
India also wants to see a competitive domestic manufacturing industry in all sectors, including solar. It is interesting to look at what Brazil is trying to do in the domestic manufacturing space.

The country managed to seed a domestic wind manufacturing industry by using as a tool, subsidised loans from the state-owned development bank, BNDES. Project developers are only able to secure loans if they use locally made equipment in the case of wind, and that model is now sought to be replicated in the solar sector.

Some of the world's largest solar panel suppliers, Yingli, Canadian Solar and SunEdison, are in dialogue with the bank, which provides credit lines for the supply chain also.

China managed to set up its solar industry on the back of generous credit lines from state-owned bodies like the China Development Bank.

Options for India
The Indian government does not have the deep pockets, or even the inclination, to fund a massive expansion in renewables. The 100 Gw plan relies on state-owned companies and large private sector entities pumping in equity into projects. Is there a question mark on the debt? Can the sector be made enticing enough for bankers by making a compelling business case?

The challenges that the Indian power sector faces are well known and well-documented. There are massive losses along the generation-to-customer chain, the financial position of state distribution companies is precarious and the free flow of power across states (open access) is still an elusive goal. Looking at these, 100 Gw of solar by 2022 does seem like an impossibility.

Yet, there is a very real and growing demand for power, and solar power is becoming even more competitive than it was. With tariffs steadily creeping upwards, there is an economic case for solar. The first comprehensive assessment of India's solar resource potential yielded an impressive number - 749 Gw - which is almost three times the total power generation capacity of 255 Gw from all sources. Rajasthan emerged at the top, as expected, with solar potential of 142 Gw. The surprise was in the state with the second highest resource - Jammu and Kashmir - which showed a potential of 111 Gw. All India needs to do is to tap 15 per cent of this potential.

Can India reach the global top spot in solar? The govt does not have the deep pockets, or even the inclination, to fund a massive expansion in renewables

When the Indian government started talking about the 100-gigawatts-by-2022 solar target, it seemed intriguing that a 600-megawatts (Mw) solar auction in Turkey last year had generated more excitement in international investor circles than this astonishing number. One of the reasons is that the 100 gigawatts (Gw) is seen as an aspiration rather than a target. If indeed it is a serious target, where is the action plan for implementation? Who are the investors? What are the incentives on offer?

It is true that countries have gone from almost nil installation to 1 Gw in as little as one year - for instance, Romania - or even built many gigawatts in a single year. China installed 12 Gw of solar last year - but it has been on the back of generous incentives. India's power minister Piyush Goyal has been saying that incentives would in fact be rolled back. Renewables need to be a "self-sustained industry and not dependent on government subsidies," he said at an industry meet last month.

India currently adds roughly 1 Gw of solar photovoltaic capacity every year. At this rate, it would take a 100-odd years to reach the targeted installations unless the annual rollout is enhanced to 12 Gw. Is that doable? Can India's grid support that?

In 2014:

China has an installation target of 14 gigawatts   Japan is likely to add 10-12 gigawatts   India would add a little over 1 gigawatt   Bloomberg New Energy Finance expects total global installations of 46-50 gigawatts, versus 40 gigawatts in 2013

King China

 

 

China boasts the world's largest market by installations currently, and has a stretch target of building 14 Gw of solar this year. Given that it has added a little over a quarter of that in the first nine months of the year, there is speculation that it could slip, yielding the number one position to Japan, which is set to add anywhere from 10-12 Gw, according to our data.

China has managed to sidestep the constraints of its grid somewhat by relying on what are referred to as distribution-grid-connected projects as distinguished from transmission-grid-connected projects. Elsewhere, the former are typically small rooftop projects, but in the case of China, most of these projects are over 1 Mw in size, and located on roofs of industrial and commercial properties.

India may be considering a similar distribution-grid-connected solution since high commercial tariffs in some states already make solar power competitive with grid power. As much as 40 Gw of the 100 Gw are expected to come from rooftop solar projects, according to government officials.

Make-in -Brazil please
India also wants to see a competitive domestic manufacturing industry in all sectors, including solar. It is interesting to look at what Brazil is trying to do in the domestic manufacturing space.

The country managed to seed a domestic wind manufacturing industry by using as a tool, subsidised loans from the state-owned development bank, BNDES. Project developers are only able to secure loans if they use locally made equipment in the case of wind, and that model is now sought to be replicated in the solar sector.

Some of the world's largest solar panel suppliers, Yingli, Canadian Solar and SunEdison, are in dialogue with the bank, which provides credit lines for the supply chain also.

China managed to set up its solar industry on the back of generous credit lines from state-owned bodies like the China Development Bank.

Options for India
The Indian government does not have the deep pockets, or even the inclination, to fund a massive expansion in renewables. The 100 Gw plan relies on state-owned companies and large private sector entities pumping in equity into projects. Is there a question mark on the debt? Can the sector be made enticing enough for bankers by making a compelling business case?

The challenges that the Indian power sector faces are well known and well-documented. There are massive losses along the generation-to-customer chain, the financial position of state distribution companies is precarious and the free flow of power across states (open access) is still an elusive goal. Looking at these, 100 Gw of solar by 2022 does seem like an impossibility.

Yet, there is a very real and growing demand for power, and solar power is becoming even more competitive than it was. With tariffs steadily creeping upwards, there is an economic case for solar. The first comprehensive assessment of India's solar resource potential yielded an impressive number - 749 Gw - which is almost three times the total power generation capacity of 255 Gw from all sources. Rajasthan emerged at the top, as expected, with solar potential of 142 Gw. The surprise was in the state with the second highest resource - Jammu and Kashmir - which showed a potential of 111 Gw. All India needs to do is to tap 15 per cent of this potential.

Govt approves 100% FDI in medical devices The health care sector in India is expected to reach $150 bn in 2017, from $80 bn in 2012, according to various reports

The central government on Wednesday approved 100 per cent foreign direct investment (FDI) in medical devices via the automatic route. The move came as a relief to the Indian health care sector, because at the moment, India imports about 70 per cent of its requirement for medical devices.

Under the automatic route, there will be no need for Foreign Investment Promotion Board’s permission to acquire an existing company or set up a new manufacturing unit in the medical devices sector.

According to Vrinda Mathur, director at Grant Thornton India, the move will give India’s medical devices sector the much-needed impetus and capital to focus on capacity building and product development. It will also “set the foundation for India to become a significant player in the global medical devices market just like pharmaceuticals”, he said.

“Easing of norms for medical devices industry by creating special carve out in the extant FDI policy on pharma sector will encourage FDI inflows in this area,” said the official statement issued after the Union Cabinet meeting in New Delhi.

“In this age of super specialisation, if medicines and pharma are one aspect, in which India has attained a certain amount of core competence, we still haven’t achieved that in medical devices, particularly which are to be installed in human body for the purpose of treatment,” Arun Jaitley said on Wednesday.

According to various reports, the health care sector in India is expected reach $150 billion in 2017, from $80 billion in 2012.

Govt may open up consumer e-commerce to foreign investors, limit in defence may increase

The Department of Industrial Policy & Promotion (DIPP) has suggested the government allow a minimum of 49 per cent foreign direct investment (FDI) in consumer e-commerce and up to 100 per cent in defence.

At present FDI is barred for e-commerce companies selling directly to consumers and the government in August increased the FDI limit in defence to 49 per cent from 26 per cent.

DIPP has given these suggestions to an inter-ministerial committee chaired by the DIPP secretary, which was set up to facilitate US investments in India. The committee, which consists of secretaries from 18 ministries, held its first meeting on December 18 to deliberate on pending issues and suggestions by ministries. DIPP's suggestions are based on submissions by different American companies currently operating in India.

The ministry of commerce and industry had on December 3 announced it would speed up approval for US investments, weeks after the two countries settled a global trade dispute and US President Barack Obama agreed to visit India. The inter-ministerial committee was set up to identify bottlenecks faced by US companies in India.

DIPP’s suggestion came after e-commerce giant Amazon, which has invested about $300 million in India, sought the government’s approval for further investments. At present, FDI is not permitted in consumer e-commerce companies and there are also restrictions on sourcing from local manufacturers.

Foreign e-commerce companies are allowed to operate as online marketplaces, but cannot sell directly to consumers. FDI of up to 100 per cent is permitted in business-to-business e-commerce.

The DIPP’s suggestion on increasing the FDI limit in defence was based on issues raised by Flextronics Technologies.

The inter-ministerial committee deliberated on issues faced by Amazon, Morgan Stanley, BAE Systems, Ford and eBay, among others. Representatives of these companies met the DIPP secretary earlier this month to apprise him on the bottlenecks they faced.

Ford pointed out issues of connectivity and logistics affecting its factories in Tamil Nadu and Gujarat.

BAE raised the need for a broader offset policy. Other issues included Amazon’s tax problems in Karnataka. It was argued that the Karnataka VAT laws were in conflict with central government regulations on FDI in business-to-consumer e-commerce.

According to government data, US companies invested $806 million in India in 2013-14, about six per cent of the total foreign investment in the country that year. Bilateral trade between the US and India stands at about $100 billion. The target has been set at $500 billion but no deadline has been set to achieve it.

FDI: THE NEXT STOP

Proposals To allow a minimum of 49 per cent FDI in consumer e-commerce   To increase FDI in defence to 100 per cent from the current 49 per cent Present scenario FDI is barred for e-commerce firms selling directly to consumers   FDI limit in defence stands at 49 per cent   100 per cent FDI is permitted in e-commerce marketplace model Investments from US US companies have invested $806 million in India in 2013-14   Bilateral trade between the US and India stands at about $100 billion *Proposals based on deliberations from representatives of US companies such as Amazon, Morgan Stanley, BAE Systems, Ford and eBay who met DIPP secretary earlier this month

E-auction not a sure cure for corruption

In May this year, the newly-appointed Narendra Modi government unveiled its priorities among which "promoting e-auction" for the procurement of goods and services ranked pretty high. The move was meant to calm the nerves of industry as well as government officials. While the former needed some assurance on transparency in government contracts after a slew of scams hit the headlines, the latter had become averse to taking decisions due to an array of charges against their colleagues in the recent past.

According to experts, the biggest benefit of e-tendering is that it leaves an "audit trail", much to the respite of the bureaucrats. However, its scope as a weapon to controlcorruption is limited. "It is no magic wand," says Neel Ratan, PricewaterhouseCoopers India executive director. "The usage of e-tendering is a mixed bag, with some states using it to a great extent. But, it is not a complete solution in itself."

But some feel it could contain corruption in government contracts and purchases. A month ago, the income tax authorities uncovered a massive corruption racket being allegedly run by a chief project engineer of Noida, Greater Noida and Yamuna Expressway. A special team has been formed to probe the Rs 954-crore tendering scam in which Yadav Singh was named. Also, following the raids, Noida Authority has now decided to go for e-tendering for projects above Rs 50 lakh.

Others insist the system is hardly foolproof. Even in the contracts which are bid through e-tendering, fake bids meant to inflate or deflate the quotes are rampant. Also, eligibility criteria are often tweaked to favour particular vendors. Leaking of information from the system by insiders also leads to foul play and manipulation of bids.

In order to ensure little scope for gaming the system, mature price discovery techniques have to be used for both products and services, says KPMG Partner (government advisory) Jaijit Bhattarcharya. "These software platforms can't be department specific, instead they should be centralised at the state government and central level to ensure minimum tampering."

Some of the avid users of e-tendering include Andhra Pradesh, Gujarat and Karnataka. In fact, Karnataka was the first to put up an e-procurement system, which was offered to other state governments and also to private companies for use by the government. Ratan adds that while e-tendering, the government should ensure wide participation, by publicising it adequately. Limited or closed tenders should be a rarity.

E-auction or e-tendering moves the process of bidding for government contracts completely online, removing most manual procedures and, therefore, creates an accountability trail. Though not mandatory, e-auctioning is quite widespread within the government machinery. The ministries of civil aviation, communications, coal and information technology have been early adopters of e-auction, using the method for their tenders over the last few years.

The Central Vigilance Commission had in 2012 asked the government and public sector undertakings to adopt and follow e-tendering process to reduce corruption in public service delivery systems. E-auctioning is also being used since 2011 for the distribution of iron ore, a key raw material for the steel industry. The ministry of road transport and highways had also directed the National Highway Authority of India and the states four years ago to strictly adopt e-tendering for better transparency in highways projects, though it says it is not being properly implemented.

However, a lot of ground still needs to be covered to move to a regime where all contracts are awarded through e-tendering.

Expert group to tackle cyber crimes The five-member expert group will prepare a road map for tackling cyber crimes effectively

The government has set up a committee to "comprehensively address" cyber crimes in the country.

This follows the arrest of Mehdi Masroor Biswas, the alleged pro-ISIS twitter handle operator from Bengaluru.

The five-member expert group will prepare a road map for tackling cyber crimes effectively, the government said in a statement on Wednesday.

"Recently, various issues relating to cyber crimes have been flagged at various fora including Parliament. India with a fast-growing economy is susceptible to international and domestic cyber attacks and there is a need to ensure cyber crime-free environment. There has been a 40 per cent annual increase in cyber crimes registered in the country during the past two-three years," it said.

The group includes Rajat Moona, director-general of Centre for Development of Advanced Computing; Gulshan Rai, director-general of Indian Computer Emergency Response Team; Manindra Agrawal, professor of computer science at Indian Institute of Technology - Kanpur; and D Dass, professor at International Institute of Information Technology; Bengaluru. Kumar Alok, joint secretary (centre state) in the home ministry, will be the convenor of the committee.

The expert group's terms of reference includes recommending possible partnerships with public and private sectors, NGOs, international bodies, etc. .

Amul to be first dairy firm to export to Russia At present, it exports milk and other dairy products to about 20 countries, including the US

Amul, the country’s largest dairy brand, is likely to benefit the most from Russia’s decision to lift restrictions on the import of milk, cheese and other dairy products from India.

Russia had to open its market to countries like India as it had imposed a one-year ban, in August, on a wide range of food products, including beef, pork, poultry, fish, fruit, vegetables, cheese, milk and other dairy products, from the US, Canada, the European Union, Norway and Australia. The move came in a response to penalties imposed on Russia over the crisis in Ukraine.

Amul, a dairy brand owned by Gujarat Cooperative Milk Marketing Federation (GCMMF), is in talks with Galactika Group of Russia for exporting milk, cheese and other dairy products.

“A team from Russia has also inspected our facilities earlier this month. We expect this to be sealed within the next couple of months,” R S Sodhi, managing director, GCMMF, told Business Standard. Beside milk, Amul might export cheese, dried milk and other dairy products to Russia.

However, Sodhi said the price of milk in the international market was a concern, and export at the moment might not be beneficial for Indian companies. “We are looking into certain things, including the prices, before taking a final call,” he added.

“The talks are still on. There has been no movement during the visit as commercial terms have not been finalised,” a senior government official told Business Standard.

At present, Amul exports milk and other dairy products to about 20 countries, including the US, West Asian countries, Philippines, Thailand, Malaysia, Hong Kong, Australia, New Zealand, Japan, Afghanistan, neighbouring Bangladesh, Sri Lanka and Nepal, among others. According to media reports, Galactika, part of FoodLine Holding, has about three per cent share in Russia’s milk market.

According to data with the Russian Federal Customs Service, import of milk and products made from Western countries to Russia rose 10.4 per cent in the first quarter of 2014 to 1,423 million tonnes on a year-on-year basis. Import of milk and dairy products rose in Russia because of shortage of raw milk and cheaper import prices.

India’s exports to Russia stood at about $2.15 billion in financial year ended March. This was a fraction of Russia’s total import of $318 billion. Of this, about $40 billion was spent to import food items from Western countries.

Experts have estimated India could export about $400 million worth of dairy products to Russia in the first year itself.