India Mulls $1 Billion Subsidy Plan To Boost Solar Manufacturing

India is finalizing a $1 billion capital subsidy plan to bolster its solar manufacturing industry, according to people with knowledge of the matter, as part of a wider effort to reduce dependence on China and profit from the global energy transition.

The proposal is being made by the Ministry of New and Renewable Energy and will target domestic makers of wafers and ingots, one of the weakest segments of the country's solar industry, according to the people, who asked not to be identified as the discussions are private. 

The plan has the backing of the top advisers in Prime Minister Narendra Modi's office and is expected to be presented to the cabinet for approval in the next few months, they said.

A spokesperson for the Ministry of New and Renewable Energy didn't immediately respond to a request for comment.

India is heavily reliant on China for imports of solar equipment, a risk to the nation's energy security. While India has grown its domestic modules and cell-making segments, wafers and ingots manufacturing still stands at just 2 gigawatts of capacity, built by Adani Enterprises Ltd. According to BloombergNEF, India has just over 71 gigawatts of modules and nearly 11 gigawatts of cells capacity. 

The proposed subsidy plan hopes to replicate the success of India's mobile-phone manufacturing industry, the people said. Modi's government has spent billions of dollars in incentives to lure companies like Apple Inc. and Samsung Electronics Co. to set up manufacturing plants in the South Asian country. Apple's iPhone exports from India have grown sharply since then.

In the solar sector, logistics and quality controls contribute to the high cost of making wafers and ingots, and the subsidies should help ease that, the people said.

Even if India were to expand its wafer and ingot capacity, it would still need to rely on foreign suppliers for the raw material they're made from, polysilicon. India doesn't have any capacity to produce the ultra-refined material, according to BloombergNEF data. China dominates global manufacturing, with capacity to produce 2.3 million tons a year, well ahead of No. 2 Germany with 75,000 tons.