Domestic solar manufacturers face bankruptcy as orders dry up

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Manufacturers are struggling to survive in the industry amid a supply glut that had cut prices by 48 per cent in 2011

By Srabani Sen

Tuesday, July 10, 2012: Where is the Indian solar industry heading? With the current dismal position of the solar manufacturers in India, it is very clear that the government has failed miserably in its plan to give domestic players the upper hand. In fact, many of the major solar companies could become bankrupt if the present situation continues. Only a government plan that ensures a level playing field for the domestic manufacturers can build up India’s solar ecosystem and be considered to be a plan with a long term vision. But the current ‘visionary’ solar plan is working against the interests of domestic manufacturers. Three recent developments in the Indian solar industry clearly prove this point.

Some dismal developments

Recently, Delta Electronics announced that it will not go ahead with the construction of a plant in Chennai due to the sluggish solar market conditions in India. According to its executive director, Anusorn Muttaraid, the company will wait and watch how the Indian market performs in the next two quarters before deciding to invest in a new plant in India.

Some of the major solar players have reported losses in the last couple of quarters. Moser Baer, for example, has reported a net loss of Rs 596 million for the quarter ended March 31, 2012. For the FY 2011-12, the company has reported a net loss of Rs 3.09 billion. As a result, Moser Baer’s shares slumped to the lowest in more than 13 years at the Mumbai stock markets when the firm announced plans to restructure US$ 738 million of loans and bonds. Private equity giant Warburg Pincus also sold its entire stake in Moser Baer for a huge loss.

Another development that shocked the industry is the resignation of K Subramanya, CEO, Tata BP Solar Ltd, after a 27 year association with the Tata Group. Although Subramanya did not mention any reason for his resignation, it is obvious that the company was not doing too well. According to an industry expert, Tata BP suffered the biggest loss in the previous financial year in 22 years. “There has been retrenching of key employees including Subramanya to cut down cost,” he added. In an interview in December 2011, Subramanya had said that, “Indian manufacturers received almost no orders for the 700 megawatts of solar capacity under construction in the nation last year, which has left their factories idle.”

Who is benefiting from the solar industry’s achievements?

According to a US Natural Resources Defence Council report on India’s solar industry, released in April 2012, India reached a capacity of 506.9 MW at the end of March 2012. This means that capacity has increased by about 489 MW compared to the installed capacity of 17.8 MW in 2010. Although this growth is, to some extent, impressive, none of the domestic manufacturers have benefitted from this achievement.

Indian solar panel and cell manufacturers like Moser Baer, Tata BP Solar, etc, are struggling to survive in the industry amidst a supply glut that had cut prices by 48 per cent in 2011. Consequently, Germany and Italy, the two biggest solar markets, have scaled back subsidies for renewable energy, dampening demand further. To top it all, Indian manufacturers are also having a hard time matching the low cost solar panels and cells dumped worldwide by the Chinese. As a result, as orders dry up, most manufacturers are running their factories at 0 to 20 per cent capacity only.

The government has rejected the plea of domestic players seeking the imposition of an import duty on finished solar equipment. It has also no objection to imports of low priced Chinese solar panels and cells as long as they meet the prescribed quality standards. So a combination of factors has set back the domestic manufacturers.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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