Heating it up!
What Indian solar water heater manufacturers expect from the industry | The manufacturing landscape of solar water heater (SWH) industry in India depicts a very fragmented picture wherein there are more than 75 manufacturers among which the top 10 contribute to more than 60% of the total products sold in India. In other words, large part of the remaining manufacturers are engaged into small scale operations and most of them are budding entrepreneurs who plan to ride on the wave of the positive story of the popular use of solar energy in various applications. The industry size of SWH is approximately `500 cr per annum and is expected to grow at approximately 10% CAGR over next three to five years period.
With such a manufacturing universe, the needs or expectations of the manufacturers may not be completely uniform in all aspects. However, there will still be some common expectations that would exist across the SWH manufacturers in India. We can widely classify the expectations on two fronts, namely, demand generation (market) and manufacturing capability improvements.
- Demand generation
- Policies and subsidies
On demand generation front, the key factors will be awareness, affordability and accessibility of products to consumers. There have been significant awareness generation activities carried out by manufacturers over the years, coupled with these; the Ministry of New & Renewable Energy (MNRE) has also implemented various generation initiatives in order to spread awareness about SWH usage in wider application segments like industries and commercial ones.
With the benefit of current subsidy offered by the MNRE under the JNNSM program, a consumer’s investment lowers by 25-30%. The government needs to offer the subsidy for another three years period during which the subsidy can be reduced in a stepwise manner before withdrawing it completely. The timely disbursement of subsidy by the MNRE to the channel partners (manufacturers) will be essential for successful deployment of JNNSM program.
The government needs to play a crucial role as regulator of ensuring the penetration of ‘good/acceptable quality’ SWH solutions in India through effective policy measures, which is critical to build consumer confidence on these relatively new technology products.
In addition to this, the government should invest in creating a large scale drive for awareness generation initiatives in high visibility media to encourage people to opt for SWH solutions wherever they have hot water requirement. This will help consumers to understand the complete benefits and can, possibly, trigger them to opt for SWH immediately. People also need to be informed about various rebates and incentives provided by the governing bodies, if they start using SWH. For example, a few local governing bodies offer rebates in property tax for consumers who have installed SWH in their homes.
- Enforcement of mandatory usage
Even though the central government has mandated the use of SWH in new buildings, the enforcement depends upon the state governments and is done through local municipal governing bodies and in most of the cases it is at a level where it can be considerably enhanced. The penetration of SWH has significantly improved in areas where the enforcement of mandatory usage is done in the right spirit of the policy. Hence, there is an urgent need of reviewing the status of SWH implementation in new buildings and also assessing the sanctity of the ‘mandatory use enforcements’ in new buildings.
- Manufacturing capability improvement
The SWH industry in India has largely been nurtured as a small scale operation of large companies or by a few entrepreneurs in this space. Thus, in order to make a sustainable business operation, these manufacturers need to have proper visibility of demand in mid to long term future. In the current scenario, wherein cheaper imports from other countries like China is a reality, the local industry needs to be safeguarded through a mix of measures on the entry barriers as well as the local government support in the form of tax rebates. With a proper mix of policy initiatives India can look at not only benefitting from the domestic demand but also the growing SWH markets across the world, mainly in Africa & the middle Eastern countries.
Another recent boost for SWH usage came post the launch of the Jawaharlal Nehru National Solar Mission (JNNSM also known as the National Solar Mission) in 2011 through which the government offered attractive subsidy (approximately 30% of the total price) to end users. This has really helped in accelerating the market growth of SWH in India because it lowered the initial purchasing cost (or consumer investment) and further improvement in payback period.
The industry needs to work in close coordination with the government in order to create a policy framework which really encourages the development of innovation in the SWH space in terms of products and solutions. The joint activity to promote SWH across the wider sets of consumers is the need of the hour.
There is an urgent need of optimum entry barriers in the industry in order to ensure that the SWH products sold in India are meeting the basic level of safety and performance norms. The cheaper – poor quality imports or even Indian SWH products will spoil the overall industry by adversely affecting consumer confidence.
Industry players need to play a significant role in improving awareness and addressing the affordability quotient of SWH will help in penetrating the usage even further. Increase in SWH usage will also help the DISCOMs in bringing the peak load electricity demands down significantly. Possibly, solar penetration could also help make it improve the electrification penetration in India by allowing DISCOMs to create and use surplus of electricity to untapped areas so far.
Thus, accelerated solar penetration could be a way of social improvement and empowerment for India at large. This needs to be attempted through a joint and shared agenda of industry stakeholders as well as the cross multi ministry task force of the Indian government.
Business Head, Renewable Energy Business
Racold Thermo Ltd