The following is from a conversation Mercom India had with Tata Power Solar CEO Ashish Khanna at the Renewable Energy Expo 2017 in Greater Noida, India. This is the first in a series of executive interviews.

Mr. Khanna, we see that you are active on both sides of the solar spectrum, what are your thoughts about the Indian Solar market?

It’s bullish. India’s solar market has huge potential and lately, in the past three years, we’ve been utilizing that potential. As a country, we installed more than 5 GW last year. We’ve demonstrated as a country that we are not just talking about solar, we are actually committed to harnessing it.

What are your key export markets and why? Are there any foreign expansion plans?

It’s not that we don’t supply Indian projects. We are into EPC (Engineering, Procurement, and Construction) and we have a pipeline of more than 1 GW in EPC, so most of our modules are for captive use. We use our own modules for projects when we bid.

As far as exports are concerned, we have been in the market for the past 27 years and for a long time we were only exporting. Our whole manufacturing unit was built with consideration of the quality that is expected of and required from exports.

While India has been a cost-competitive market, we also feel that at times some firms compromise quality to achieve lower costs. We are not keen on that particular way of doing business.

We export to large clients in the UK, Europe, and the Middle East. Europe has primarily been a big market for us. In the past, the UK was the main destination for our exports. But now, due to policy changes and the ending of subsidies last year, our exports to the UK have declined. Despite that, we expect our supply to Europe will increase in the next few quarters as our partners in the UK are now developing projects elsewhere in Europe. We are also looking toward the Far East.

What are Tata Power Solar’s expansion plan for India?

Technology changes so fast that you have to stay a step ahead of the curve. In the past, we have not only expanded according to quantity but also according to technology. We have invested in research and development and technology expansions that will help us stay ahead of the curve. These new technologies need to be infused with manufacturing facilities to create quality products.

We expect our volumes to increase as a result of the technologies we have invested in. If investment is not made in the technology, expansion plans will fail and you lose out. In India, many manufacturers are losing the race due to a lack of investment in technology.

Do you have comments on the potential for anti-dumping tariffs?

Personally, I think that any sort of punitive action is not good for the industry. The industry should be self-sustained.

However, the government does need to support the initial phase for an industry in order for it to reach a particular size. India has not yet reached that size. Our total manufacturing capacity is not even 10 percent of China’s, so if we (Indians) have to compete with global manufacturers at a cost level then we need certain support to reach a needed level of maturity.

In China, or any other country with major manufacturing facilities, certain support is provided for those manufacturing units. Solar manufacturing is a highly power-intensive process and in those places, they receive support to set up manufacturing and for the cost of power.

In India, manufacturers have yet to invest in facilities that make wafers and PV, primarily because the cost of power is very high and making these becomes non-competitive without government support or a protective mechanism.

There are two ways that the manufacturing industry can be encouraged. One is a protective mechanism that helps to scale up the manufacturing so that it can become big enough to compete. Turkey has done it, China has done it, even the U.S. is planning to do it in the near future.

The second way is by providing a supportive mechanism. If both protective and supportive mechanisms are provided then they will ensure that the industry progresses. That way, if a protective mechanism is failing or dragging then there’s always a second supportive mechanism that can lift the sector up.

What do you think the government wants?

The government is keen to support the manufacturing sector and they will find many ways to do that. As of now, the M-SIPS (Modified Special Incentive Package Scheme) is there.

For manufacturing, there are two key points – market and quality.

The manufacturing sector will grow if there is a business opportunity. At the end of the day, the government can promote the manufacturing sector (all it wants) but the product that is made ultimately needs to have a market. Tata Power Solar has requested that rooftops be reserved for domestic products. In terms of rooftop installation, we are currently at a level consummate with our level of manufacturing capabilities. The government has set a target for 40 GW of rooftop solar by 2022.

Manufacturing should be viewed from a quality standpoint. Most developers have quality systems for utility-scale projects, but we don’t have these parameters for rooftops and this has created a grey area. If domestic manufacturing is reserved for rooftops, then as rooftop installations grow manufacturing will grow too and quality parameters will ensure the quality of that growth.

Do you have any comments on the recently enacted Goods and Services Tax (GST)?

Different consultants are giving different GST rates. Some pockets in the industry are going ahead with the 5 percent rate, but our consultants have a different opinion.

Unfortunately, in recent bids we’ve seen government entities asking us to absorb variations like the GST. But how can we absorb the cost when we do not understand it? The GST ambiguity is not helping the industry. The tax rate has increased (the tax holiday was done away with and the AD reduced). We expect to have clarity in a short amount of time and will be able to recoup what has been lost. 

Is a tariff below ₹2.50 (~$0.038)/kWh viable?

Tariffs are based on certain assumptions. In the past, whether it was ₹4.67 (~$0.073)/kWh, ₹4.33 (~$0.067)/kWh, or ₹3 (~$0.047)/kWh, these price assumptions came true and made developers happy. They assumed certain module costs and these were the costs that materialized during procurement.

The trend of lowering costs depends on how bad the companies want the projects. The strategy towards margins plays a role in this.

The wholesale price index is increasing but solar is going the other way (and falling) due to assumptions related to financing and panel costs. If these two cost assumptions change then prices will change.

In addition, if the developer depends on imported components for a project then foreign currency fluctuations will also play a part in the tariff determination. The developer doesn’t actually buy modules at the time of bidding, the actual purchase is done almost six to nine months after bidding. It’s a matter of parking and managing risks in the manner they deem fit.

Can you comment on the outcome of anti-dumping case in light of the backdown by petitioners in a similar case in 2014?

I was not a part of 2014 petition. But, this time around we have participated. There are a few critical things that we need to understand.

Even if an anti-dumping duty comes, would everyone in the country be able to take advantage of it? Or would there be certain caveats available, for instance if you are in a SEZ/EOU area, this duty wouldn’t apply. This is a grey area that the government should address.

With respect to the anti-dumping duty, the association has filed a petition for both anti-dumping as well as a safeguard duty. Tata Power Solar welcomes any support that would come in for manufacturing. But, the government must ensure that the benefits go to everyone, not just a few.

Update: Title Modified