To tap India's solar power potential, the Ministry of New and Renewable Energy has sought an increase in the 50-Mw cap imposed by the government for availing the benefits of the solar power incentive scheme.
The government had earlier said it would give incentives of around Rs 12 per unit of solar power sold. Companies have, however, already lined up capacities to the tune of 3,000 Mw involving investments of around Rs 48,000 crore (Rs 480 billion).
This means that of the total planned solar power capacity, only 50 Mw will be incentivised, while the rest will continue to be very expensive.
"The proposal is not just to increase the cap on total capacity of 50 Mw to be added under the scheme. We have written to the prime minister and are waiting for a response," said Vilas Muttemwar, minister of state for new and renewable energy.
Setting up a solar power plant costs around Rs 16 crore (Rs 160 million) per Mw, which is almost four times the cost of building a coal-based power plant.
This high cost is one of the reasons the sector has not attracted too many players. Reliance Industries, the country's largest company by market capitalisation, has already said that it will invest about Rs 30,000 crore (Rs 300 billion) to set up solar power plants.
If the cap is not raised, such investments may dry up, industry officials say.
"A 50-Mw cap is too low to accommodate all the manufacturers compared with the potential India has. The government should increase it. But before that, it has to come up with adequate policies to address problems like short supply of photo voltaic silicon wafers," said Ravi Kumar, chairman and managing director of Bharat Heavy Electricals Ltd, India's largest power equipment manufacturer, which also supplies solar panels.