In India’s energy transition process, there has been a growing reliance on China. It is not only us, but the West has also realized this. How do you see this landscape evolving?

We saw this about two or three years ago and decided to do something about it. We have put in place three mechanisms. One of the mechanisms was the approved list of models and manufacturers. Thus, only the models are used in our diagrams listed there. Second, we decided to erect a tariff barrier. We announced it about a year and a half in advance, and we said that from April 1, 2022, we will put in place a price barrier of 40% on modules and 25% on cells. Now, this step has spurred a huge amount of manufacturing investment here. Today, I have about 30 GW of cell and module manufacturing capacity to come. Next, we proposed a production-linked incentive program (PLI). So it was for about 4,500 crores. We sanctioned almost 10 GW capacity below that. Then we come out with another PLI scheme for 19,500 crore. That’s part of it 24,000 crore which was announced in the budget (FY23). Thus, the Cabinet note for a new PLI scheme using 19,500 crore is in front of the cabinet. This will lead to an additional 40 GW of manufacturing capacity, from polysilicon to modules. That’s 80 GW. Also, I have a permanent capacity of about 12 GW. So basically all of these upcoming capabilities will make us an exporter.

Some of them are old, so I told the manufacturers that we will be phasing out the capability, which produces the older models of modules with less efficiency. We are going to come up with a policy where we will put a threshold of efficiency, in the sense that we will announce every two years the minimum standard of efficiency, which will be acceptable. My statement is that you can’t take the locals for granted, and you can’t sell old-fashioned, inferior products anymore. Currently, the most efficient modules are said to be between 21.5% and 22% efficient. So that’s what I’m aiming for, and I want to drop the lows.

This came at a cost by slowing my ability addition. But I’m willing to pay that price. I am not prepared to allow manufacturers to profit simply because I have erected a barrier. I told them not to increase the prices of cells and modules for no reason. Otherwise, we can even think of reducing the barrier. We want to manufacture in India, but we will not allow you to exploit the situation to make windfall profits and drive up the cost of electricity. If you sell modules at 30-32 cents per kWh and you sell at 40 cents, that means the cost of electricity will increase that much more. People will have to pay for it. I will not bear it. Now the price of the module is 36 cents per kWh.

I took a meeting with the developers; they said there was no justification for such high prices. I also took a meeting with the manufacturers. So they gave me a math on how 36 cents per kWh makes sense and is fair. They said there is no polysilicon manufacturing capacity in our country or anywhere else except China. The Chinese have raised polysilicon prices by around 300-400%. Wafer prices have increased by 300-400%. Therefore, the price of wafers, according to them, today is 25 cents per kWh, and they say the conversion cost is equal to 15 cents per kWh. That’s 40 cents per kWh, so where’s my margin? That’s what the builders said. So I asked the department to check all that. We’ll check, and we’ll make a decision on that front.

How much capacity is impacted due to high prices?

The capacities impacted, according to our information, are around 26 GW. It’s big. My installed solar capacity is around 60 GW. It’s not all about the prices. Part of the capacity impact is due to covid. What happened is that these capacities were auctioned before covid and before the announcement of the imposition of tariffs. Thus, the offers arrived without taking into account customs duties. So for these capacities, either customs duties must be excluded, removed for them, or it must be a transfer. States are unwilling to grant pass-through because they say 40% pass-through is too much.

So we are in discussion with the Ministry of Finance for the grandfather clause. We granted two extensions of almost 18 months. For this reason, the capabilities that would have been completed before the duties crossed this line, and by the time those capabilities were ready for module installation, the duties entered. With the states not wanting to cross and the Treasury not wanting to grandfather them, we’re working out a modality. The position of the Ministry of Finance is to let the promoters pay the duty, and then after that we will create a head in which we will give you the money, so that you can pay back this duty. So that’s, I think, a better solution.

In solar, even if you give BCD relief, how long would it take for projects to be completed?

Basically, these are the challenges we have to face when we decide to do “Make in India”. But in the meantime, I’m not going to allow anyone to make a windfall profit.

Your opinion on the wind power sector?

The wind sector has not grown as fast as we would like. We have talked to the industry to find out why this is so. They said that because of the method of capacity allocation that we have adopted, by open offer and reverse auction, the rates that we arrive at are low. So, people can only go to the windiest state, which is Gujarat. There, the availability of land becomes a problem. Transmission also becomes a problem.

We are therefore looking for a system in which all wind capacities are installed in all windy states. So we did an exercise. Now if I try to build capacity in all windy states together, I don’t get a rate. I have a bundle of rates. The wind speed will be different in Madhya Pradesh, Andhra Pradesh, Karnataka and Gujarat, so the electricity tariffs will also be different. So we decided to propose a rule for pooling and grouping. All rates will be aggregated and then offered. It will be a kind of rotation every five years. Whether these bids are just a closed bid or after a closed bid you have a reverse auction is something we are tackling.

What is your opinion on that?

The jury is out on whether a reverse offer should be there or not. While the reverse auction will drive prices down, I also want capacity. There should not be cases where offers are made, but projects are not installed. We will do the same in solar. If someone wins a bid and doesn’t build, not only will their bank guarantee be lost, but they will be blacklisted for 10 years.

How do we stand on the front of coal stocks for energy projects?

We have some concerns. We make sure the output is robust. When the stock fell to 7-8 million tonnes (mt), or about 2-3 days of stock, I ordered the power plants to start mixing. The mix has been around since 2004-05. Then in 2018 the coal ministry said we had enough coal, so tell everyone to reduce the mix or stop it. Thus, the mixture went from 25 to 8 tons. But after that, the demand increased. Coal supplies have also increased, but not to the required level. So we said to ourselves: start mixing again.

I made 10% mix. Then, stocks rose to 24 tonnes. Then I told the states and IPPs that now that the 10% blending requirement is removed, you blend as needed. But, to some gencos, I said from 10% you bring it down to 5%. They brought it down to 5% and their shares started going down very quickly. They came to us and said it allowed us to bring our mix down to 10%, but even then their inventory kept going down. Again they came back to us and said they were allowing us to go up to 15%. So we said okay. Now the shares continue to fall. It was 24 meters away. Now it is 20 mt. Every day, the arrivals of domestic coal are around 200,000 to 300,000 tonnes less than daily consumption. But despite the brewing, we go down. So basically that tension remains. What’s great is that we’ve added so many renewables.

There was a thought process about the acquisition of REC by a non-NBFC PSU, and Power Grid Corp. was considered for the same. What’s going on there?

It is under review. It has major advantages. Once you have two NBFCs together, which are good companies, their combined borrowing and lending power decreases. But my industry is growing because my demand is up 18% year over year. So I need to add capacity, and I need funding. The decision that was made at the time was that if you had one business instead of two different businesses, they wouldn’t compete with each other. You will have synergies of scale, and their ability to borrow at lower interest rates will lead to lending at lower interest rates. Subsequently, one thing we noticed is that you need a company that will also play a dual role of supporting distribution companies and providing them with advice, expertise, etc., which is REC. Thus, REC as a separate entity adds the greatest value as it leads the entire distribution industry, sponsors it, guides it and provides advice. Currently, my established capacity is 404 GW. Now my consumption is 1,450 billion units. It will double in 2030 and rise to 2,900 billion units. My capacity must go up to 820 GW. So I have to add 400 GW. So, I need huge funding.

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