The government’s decision to keep the Approved List of Models and Manufacturers (ALMM) policy in abeyance for a year has prioritized expeditious solar capacity addition over injecting some uncertainty among module manufacturers.

A top government official privy to the deliberations said that the decision to postpone ALMM mandate for a year is because of the steep target of 280 GW by 2030.

Earlier this month, the government suspended the application of ALMM until March 31, 2024.

The official added that the Ministry of New and Renewable Energy (MNRE) felt that continuing ALMM restrictions would irreversibly stymie India’s solar progress. The module supply regime needed to be liberalized, at least briefly.

The ministry also evaluated that while ALMM suspension would disappoint the manufacturing industry in the short run, the sector can overcome the impact given that it is still ramping up capacity and technology.

“Besides, the government’s aim to bring ALMM was to have a standardized system to maintain the quality of solar modules. However, the move was wrongly interpreted as an attempt to block foreign module manufacturers, which was never the intention,” the official said.

He clarified that the ALMM list did not include any module manufacturing facilities outside India, especially those in China because the prolonged COVID-19-related restriction in the country prevented Indian officials from carrying out inspections according to the ALMM mandate.

Further, the official said that the ALMM list had created a closed market where suppliers could leverage their unique position on pricing the modules, which had exasperated the developers.

Solar projects have been facing delays despite extended timelines, partly because of the unavailability of quality products at a viable cost. The developers conveyed this to policymakers while advocating for suspending ALMM.

Manufacturers’ Grievances

Multiple manufacturers Mercom spoke to agreed that the decision would adversely impact the manufacturing sector because of the uncertainty over frequent policy changes.

“What’s the guarantee that the government wouldn’t extend ALMM exemption for another year once the current period ends? Business decisions regarding investments or accepting customer orders suffer from inefficiency in the uncertain policy environment,” a prominent manufacturer said.

However, opinions varied on the extent of the impact on the industry. While some described the government’s decision as ‘catastrophic’ for the industry, others said it would only be ‘somewhat inconvenient’ for them.

One manufacturer explained that the government’s policy reversal would hurt those who have already lined up investments for capacity expansion or are in the middle of the exercise to cater to the projected domestic demand.

However, manufacturers with export orders are not concerned with the policy change, as the recent spike in exports has shown.

Even before the policy reversal was announced, Minister of Power R.K. Singh had said that Indian manufacturers only had 10 GW annual capacity for making ALMM certified modules of 500 Wp and above. At the same time, the project pipeline with the requirement already exceeded 70 GW.

More Challenges Ahead for Developers

After months of campaigning, the developers convinced the government to lift ALMM, but their other demand for a two-year extension went unfulfilled.

Some developers have pointed out that a one-year extension does not cover the project’s 18–24-month development cycle, which has watered down the positives for developers.

But the existing Basic Customs Duty (BCD) of 40% on the import of modules mitigate the ALMM decision somewhat, as the price difference between the Chinese and domestic modules has ceased to be significant.

The recent and unprecedented decision from the ministry to blacklist developers that fail to commission projects on schedule has added to their woes.

“Prioritizing India’s solar installation goal of 280 GW by 2030 over short-term manufacturing policies is the right move and sends a message that policymakers are willing to do whatever it takes to achieve these goals. That said, unpredictable policy changes from year-to-year does not instill confidence in the markets. Policymakers must quickly start laying out clear plans and steps for next year and eliminate uncertainty in the markets well before the March 31st, 2024 deadline,” said Raj Prabhu, CEO of Mercom Capital Group.