Sep 2021

How To Maintain Quality Under the New Indian Basic Customs Duty Scheme in 2022?

Starting on April 1st, 2022, solar modules and solar cells imported into India will be subject to a 40% and 25% basic customs duty (BCD) respectively. Concurrently, the Indian government is launching the Production-Linked Incentive (PLI) for Large Scale Electronics Manufacturing under which 10GW worth of cells and module manufacturing facilities will be subsidized. Under these conditions, the PV industry expects a shift in the supply chain of Indian PV projects in 2022, from being today dominated (>85%) by importation of foreign (mainly Chinese) modules to a more domestic-centered supply chain. 

It is generally challenging to maintain a high level of quality through any disruption of the supply chain: it takes time for new factories to build stable processes, to design robust quality management systems, to integrate new requirements and for new operators to acquire training and experience. One important element to be looked at in this context is the Quality Control Plan (QCP) used during manufacturing of the components. The QCP describes all the quality control activities performed by a manufacturer during production as well as the criteria used to accept or reject the products. How often a flasher gets calibrated during a production run, and how many microcracks are acceptable in a finished module are, for instance, described in the QCP. Commanding manufacturers to use an appropriate QCP is the first step to ensure quality. Ideally, a standardized QCP, such as the one described in the Industry Standard STS-STD-PVM1:2018©, is used across the entire portfolio of projects, maintaining the same level of quality regardless of the evolution of the supply chain. The second step is enforcement, during production, of the quality requirements agreed upon beforehand and described in the QCP. This step is typically performed by second party experienced and accredited inspectors, regardless of the location of the manufacturing plant. 

Another approach to maintain quality is to internalize production. A developer may indeed ramp up its own production capacity to secure steady supply of modules, while capturing directly some of the government subsidies. Some major players in the Indian PV industry like ReNew Power, Azure Power and Adani Green have announced that they will build up PV modules and cells manufacturing capacity to cater their needs. This is not unlike similar approaches observed in India in other industries. For instance, Indian regulations also encourage cars to be assembled in India rather than being imported as completely built units by setting an import tax of 125% on foreign imported cars, while the tax on components is only of 10%. Within this approach, controlling the quality of module components, instead of finished PV modules, becomes necessary. All components of the PV modules may benefit from a second-party quality inspection. However, the most critical component is the cell, for which not only quality matters (type and amount of silver paste, quality of the silicon material, bi-faciality, current sorting, etc.); but also other elements matter, such as provenance of the silicon (for social or environmental responsibility reasons), or respect of intellectual property rights (in the design, or in the materials used), etc. 

Regardless of the approach, quality control is likely to take an even more predominant role in the context of this new customs duty, to secure long-lasting components for Indian projects.