Solar industry’s wish list for Union Budget

UPSC Study Note: Solar Industry's Wish List for Union Budget

1. At a Glance

• India's solar sector has emerged as the second-largest generator by installed capacity in the domestic power mix, having grown from 3 GW (2014) to 129.92 GW (October 2025)—a ~43-fold increase in a decade. [S1]
• Pre-budget demands from industry bodies (NSEFA, SESI) centre on three pillars: PLI extension to ingots, PM-KUSUM second instalment, and Viability Gap Funding (VGF) for energy storage. [S4]
• Directly relevant to GS-III (Infrastructure, Energy, Economy) and GS-II (Government Schemes); frequently tested in both Prelims and Mains.
• India's 500 GW non-fossil capacity target by 2030 (NDC commitment) makes solar budget allocations a recurring examination anchor.

2. Why in the News

• January 13, 2026 (The Hindu BusinessLine): Industry bodies — the National Solar Energy Federation of India (NSEFA) and the Solar Energy Society of India (SESI) — submitted a pre-Budget wish list ahead of Union Budget 2026–27, demanding: [S4]
• A new/enhanced PLI scheme for solar ingot manufacturing.
• Second instalment of the PM-KUSUM scheme.
• Viability Gap Funding (VGF) for energy storage to complement solar deployment.
• Context: India's solar capacity crossed 100 GW in 2024 and hit 129.92 GW by October 2025, making sector-specific budgetary support a high-stakes policy question. [S1]

3. Background & Evolution

• Predecessor: JNNSM → National Solar Mission (NSM) under NAPCC 2008.
• Solar now part of the broader 500 GW non-fossil capacity by 2030 NDC target.

4. Core Static Facts

Key Schemes

PM-KUSUM Components (as of Nov 2025) [S2]

• Component A: Decentralised ground-mounted solar plants — 667.31 MW installed.
• Component B: Standalone solar agriculture pumps — 9.42 lakh installed.
• Component C: Grid-connected agriculture pump solarisation — 10.99 lakh installed.
• Total PM-KUSUM: 10,203 MW installed; 6,515 MW (64%) added in 2025 alone. [S2]

PLI Performance (June 2025) [S2]

• Investment attracted: ₹48,120 crore
• Jobs created: ~38,500
• Letters of Award issued for 48,337 MW integrated/partially-integrated manufacturing.

Installed Capacity

• Solar: 129.92 GW (October 2025) — second-largest in installed capacity after thermal. [S1]
• Growth: ~43× since 2014 (3 GW → 129.92 GW). [S1]

Key Bodies Cited

• NSEFA (National Solar Energy Federation of India) — apex industry body; CEO Subrahmanyam Pulipaka. [S4]
• SESI (Solar Energy Society of India) — represented by Prafulla Pathak. [S4]
• Implementing Ministry: Ministry of New and Renewable Energy (MNRE).

Regulatory Framework

• Solar projects facilitated under Electricity Act, 2003 (as amended 2022) and National Tariff Policy 2016.
• RPO (Renewable Purchase Obligation) mandates under Energy Conservation Act, 2001 (amended 2022).
• BIS Approved Modules List (ALMM) — mandatory for government-funded projects.

5. Multi-Dimensional Analysis

Economic

• Solar PLI investment of ₹48,120 crore has generated 38,500 jobs by mid-2025; expansion to ingots (upstream) could deepen the domestic value chain. [S2]
• India currently imports ~70–80% of solar cells and wafers from China; PLI for ingots targets this import-substitution gap. [S4]
• VGF for energy storage would lower the cost of Battery Energy Storage Systems (BESS), making solar dispatchable and reducing grid integration costs.
• Solar sector contributes to fiscal consolidation through avoided fossil fuel imports (India's crude import bill ~$100 bn/year).

Environmental

• 10,203 MW of PM-KUSUM capacity avoids significant diesel use: earlier data showed 143 million litres diesel avoided per year even at lower installed base. [S2]
• Solar energy directly displaces coal-fired generation, reducing CO₂ emissions; India's NDC target — net zero by 2070 and 50% non-fossil power by 2030.
• Large-scale solar land use raises concerns of land-use change and habitat disruption (especially in arid/semi-arid zones).

Administrative / Federal

• PM-KUSUM implementation is state-dependent (DISCOMs and state nodal agencies); slow state uptake is a chronic bottleneck.
• VGF for storage requires coordination between MNRE (solar) and MoP (grid/storage); inter-ministerial alignment is a perennial challenge.
• ALMM compliance has periodically restricted project timelines due to limited domestic module supply.

Scientific / Technological

• Ingots are upstream in the solar PV value chain: Polysilicon → Ingot → Wafer → Cell → Module; PLI currently covers modules and cells but not ingots/wafers — the demand targets this gap. [S4]
• Energy storage (BESS, pumped hydro) is essential to address solar's intermittency; VGF would de-risk early-stage storage projects.
• India's solar irradiation (~4–7 kWh/m²/day across most regions) gives natural comparative advantage.

Geopolitical / Strategic

• China dominates the solar PV supply chain (~80% of global module production); indigenisation via PLI is a supply-chain de-risking strategy with strategic dimensions akin to semiconductor PLI.
• Solar exports can support India's green trade credentials under emerging Carbon Border Adjustment Mechanism (CBAM) regimes of the EU.

Social

• PM-KUSUM directly benefits farmers by reducing electricity/diesel costs for irrigation pumps; 9.42 lakh standalone pumps installed. [S2]
• PM Surya Ghar targets residential consumers, especially low-income households, through free electricity up to 300 units/month. [S3]
• Solar manufacturing jobs tend to be semi-skilled, offering livelihood opportunities in tier-2/3 geographies where factories are located.

6. Recent Developments (last 12–18 months)

• 2025: India recorded highest-ever renewable energy expansion in a single year; solar capacity crossed 100 GW (milestone achieved in 2024). [S1]
• 2025: PM-KUSUM added 6,515 MW in the year — ~64% of total cumulative installation. [S2]
• June 2025: PLI Solar attracted ₹48,120 crore investment and 38,500 jobs. [S2]
• October 2025: Installed solar capacity reaches 129.92 GW, making India third-largest globally (after China, USA). [S1]
• January 13, 2026: NSEFA and SESI submit pre-budget memoranda demanding PLI for ingots, PM-KUSUM second instalment, and VGF for energy storage. [S4]
• PM Surya Ghar: Muft Bijli Yojana (launched 2024): ₹75,021 crore scheme targets 1 crore households by FY 2026-27. [S3]

7. Prelims Hooks

1. India's installed solar capacity as of October 2025: 129.92 GW (second-largest by installed capacity in India's power mix). [S1]
2. Solar growth since 2014: from 3 GW to 129.92 GW — approximately 43-fold increase. [S1]
3. PLI for Solar PV Modules total outlay: ₹24,000 crore (Tranche I: ₹4,500 crore, April 2021; Tranche II: ₹19,500 crore, September 2022). [S2]
4. PLI Solar Letters of Award issued for 48,337 MW of manufacturing capacity. [S2]
5. PM-KUSUM full form: Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan; implementing ministry: MNRE. [S2]
6. PM-KUSUM Component B (standalone solar pumps installed as of Nov 2025): 9.42 lakh. [S2]
7. PM-KUSUM Component C (grid-connected pump solarisation): 10.99 lakh. [S2]
8. PM Surya Ghar: Muft Bijli Yojana outlay: ₹75,021 crore; target: 1 crore rooftop households by FY 2026-27. [S3]
9. NSEFA = National Solar Energy Federation of India; SESI = Solar Energy Society of India. [S4]
10. The three budget demands of the solar industry (Jan 2026): (i) PLI for ingots, (ii) PM-KUSUM second instalment, (iii) VGF for energy storage. [S4]
11. Solar PV value chain (upstream to downstream): Polysilicon → Ingot → Wafer → Cell → Module — PLI extended to modules/cells but NOT yet to ingots. [S4]
12. ALMM (Approved List of Models and Manufacturers) — mandatory for solar modules in government-funded projects; administered by MNRE.
13. India's NDC renewable target: 500 GW non-fossil capacity by 2030; net-zero target: 2070.
14. PLI Solar investment attracted as of June 2025: ₹48,120 crore; jobs: ~38,500. [S2]
15. 2025 saw highest single-year renewable addition in India's history. [S1]

8. Mains Relevance

GS Paper: Primarily GS-III (Indian Economy — Infrastructure, Energy; Government Budgeting; Science & Technology — indigenisation) Also touches GS-II (Government Schemes, Welfare).

Syllabus headings: - Infrastructure: Energy — renewable energy, storage, grid integration - Government Budgeting — PLI, VGF, subsidy rationalisation - Science & Technology — indigenisation, manufacturing ecosystem

Plausible Mains Questions: 1. "India's solar sector has grown rapidly, yet remains import-dependent at the upstream end of the value chain. Critically examine the role of the PLI scheme and the budget measures needed to build a fully indigenous solar manufacturing ecosystem." (GS-III) 2. "Discuss how Viability Gap Funding (VGF) for energy storage can transform India's solar energy landscape. What are the fiscal and governance challenges in its implementation?" (GS-III) 3. "PM-KUSUM has been hailed as a scheme that can simultaneously address farmer distress and clean energy goals. Evaluate its performance and suggest measures to accelerate uptake." (GS-II/III)

9. Related Topics to Study Next

10. Common Errors / Trap Areas

1. Ministry confusion: Solar schemes (PLI, PM-KUSUM, PM Surya Ghar) are implemented by MNRE, not the Ministry of Power (MoP) — though grid/storage involves MoP too.
2. PLI coverage error: Current PLI covers modules and cells — NOT ingots or wafers. The Jan 2026 budget demand is specifically for extending PLI upstream to ingots; do not conflate with existing PLI.
3. PM-KUSUM components: Three components serve different purposes — Component A (decentralised plants/feeders), B (standalone pumps), C (grid-connected pump solarisation) — they are frequently mixed up.
4. Capacity figure trap: "Second-largest installed capacity" refers to solar's position in India's power mix (second after thermal), NOT India's global ranking (third globally after China and USA).
5. VGF ≠ Subsidy: Viability Gap Funding is a one-time capital grant to make commercially unviable but socially/strategically desirable projects viable — distinct from ongoing subsidies or PLI incentives. Examiners test this definitional precision.

11. Sources

• [S1] "2025 Marks Highest-Ever Renewable Energy Expansion in India's Energy Transition Journey" — https://www.pib.gov.in/PressReleasePage.aspx?PRID=2209478 — (Tier 1: pib.gov.in)
• [S2] "India's Solar Momentum" (PIB Factsheet / Press Release on PLI and PM-KUSUM) — https://www.pib.gov.in/PressReleseDetailm.aspx?PRID=2199729 and https://www.pib.gov.in/FactsheetDetails.aspx?Id=148576 — (Tier 1: pib.gov.in)
• [S3] "India's Energy Landscape: Powering Growth with Sustainable Energy" (PIB Document, June 2025) — https://static.pib.gov.in/WriteReadData/specificdocs/documents/2025/jun/doc2025622575501.pdf — (Tier 1: pib.gov.in)
• [S4] "Solar industry's wish list for Union Budget" — Saptaparno Ghosh, The Hindu BusinessLine, 13 January 2026 — https://www.thehindu.com/todays-paper/2026-01-13/th_international/articleG1SFEBKTI-13099202.ece — (Tier 4: thehindu.com; primary article supplied by user)

Note: WebFetch was disabled per retrieval budget constraints; all web facts grounded in search-result snippets from pib.gov.in (Tier 1) and the user-supplied article (Tier 4).