Mentor’s Comment

This article is critical for GS Paper III (Energy, Infrastructure, Industrial Policy). It highlights structural limits of India’s PLI-driven manufacturing strategy, especially for technology-intensive green sectors, and questions the assumption that fiscal incentives alone can deliver strategic self-reliance.

What Is the Strategic Objective Behind Non-Fossil PLI Schemes?

1. Energy Transition Target: Supports installation of 500 GW non-fossil capacity by 2030.
2. Industrial Deepening: Enables domestic manufacturing of solar and battery components.
3. Import Substitution: Reduces reliance on imported green technologies.
4. Global Integration: Positions India as a supplier in global clean-energy value chains.

How Have PLI Schemes Performed Across the Value Chain?

1. Downstream Assembly: Achieved 56% of target in solar module assembly by mid-2025.
2. Upstream Manufacturing: Remains a bottleneck in both solar and batteries.
3. Value Chain Imbalance: Assembly expanded faster than material and component production.

Why Are Upstream Solar Manufacturing Segments Lagging?

1. Polysilicon Manufacturing: Achieved only 14% of the target capacity.
2. Wafer Manufacturing: Reached merely 10% of the planned capacity.
3. Capital Intensity: Requires high upfront investment with long gestation.
4. Technology Dependence: Relies on specialised global expertise and equipment.

What Explains the Failure in Battery Cell Manufacturing?

1. Target Capacity: 50 GWh of domestic battery cell production.
2. Fiscal Outlay: ₹18,000 crore under PLI.
3. Actual Commissioning: Only 1.4 GWh (2.8%) by late 2025.
4. Domestic Value Addition Rules: Mandate 25% within two years and 60% within five years.
5. Gigafactory Complexity: Requires advanced infrastructure and long-term R&D ecosystems.

How Do Policy Design Constraints Affect Outcomes?

1. Capital-Only Incentives: Assume finance can substitute for expertise.
2. Skill Deficits: Ignore the need for decades of workforce training.
3. Technology Transfer Limits: International transfers are capital-intensive and slow.
4. Penalty Structure: Firms face steep fines for missing deadlines despite structural hurdles.

What Role Do External Dependencies Play?

1. Imported Raw Materials: Persistent reliance on foreign inputs.
2. Specialised Expertise: Dependence on foreign technical experts.
3. Visa Restrictions: Non-issuance of visas to Chinese technicians delayed factory setup.
4. Supply Chain Risk: Increases vulnerability in strategic energy sectors.

Why Has the Telecom PLI Succeeded While Green PLIs Struggle?

1. Lower Technology Entry Barriers: Telecom manufacturing required fewer foundational innovations.
2. Established Ecosystems: Global supply chains were already mature.
3. Faster Market Realisation: Sales-linked incentives translated quickly into output.
4. Green Tech Contrast: Solar and batteries require upstream industrial ecosystems, not just assembly.

What Rethinking Does the Article Suggest for PLI Design?

1. Expertise-Based Selection: Prioritises technical capability over net worth.
2. Capital Risk-Sharing: Considers additional capital subsidies for upstream segments.
3. Longer Timelines: Aligns targets with technology development cycles.
4. Ecosystem Approach: Integrates R&D, skills, and industrial infrastructure.

Conclusion

Capital support alone cannot manufacture technological capability. India’s clean-energy ambitions require patient industrial policy, focused on skills, research, and ecosystem creation. Without recalibrating PLI design to reflect the realities of high-technology manufacturing, the gap between targets and outcomes is likely to persist.

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