Solar Integrators Oppose Government’s Move to Only Allow Manufacturers to Bid under KUSUM

The amendment allowing only manufacturers to participate in tenders under the KUSUM program puts a question mark on the future of system integrators in India


It was recently announced that only the manufacturers of solar pumps and modules had been allowed to bid for tenders under KUSUM program after recent amendments to the guidelines.

This amendment was issued by the Ministry of New and Renewable Energy (MNRE) to ensure the quality and to assure post-installation services for solar water pump projects.

However, system integrators of solar water pump systems have now raised concerns about the KUSUM program allowing only manufacturers to participate in tenders. According to system integrators, they play a crucial role in the solar pump industry, and this move by the MNRE could have negative ramifications for the industry at large.

An executive at a system integration company told Mercom that 60% of all solar water pump installations in India had been done by the integrators. The integrators argued that the amendment issued by the MNRE could change the dynamics of how the industry operates and pointed out the following issues with the government’s move:

  • Solar water pump manufacturers do not have experience in large-scale deployment of projects as their focus is manufacturing and servicing the products they supply
  • State nodal agencies have until now focused on nurturing and building capabilities of system integrators which are now at risk
  • There was a 50% price difference between the tenders released at the start and end of 2018. This was made possible due to the constant product and process innovations by integrators. Due to the centralized one-time tender, advantages of this advancement won’t be realized by the government and tax-payers’ money will not be effectively utilized. The price will be fixed for the entire year, and the incentive to continually innovate won’t be maximized
  • There are already several performance requirements if the quality of service is a worry like – penalties for service delays, performance guarantees, among others.
  • System integrators can offer competitive rates for setting up solar water pump systems which manufacturers may not be able to offer. Even if manufacturers try to compete, they will do this at the risk of lack of quality
  • If system integrators are not allowed to participate in these tenders, it could cause thousands of job losses

Speaking to Mercom on the adverse impact of the government’s decision, Gaurav Kumar, co-founder, and director, Claro Energy, said, “The reason given by the MNRE for allowing only manufacturers of solar pumps and modules to participate in the KUSUM tenders is “to ensure quality and post-installation services.” If that is the case, why are they restricting the system integrators who have so far installed over 70% capacity in India? The installation not just requires a pump and a solar module but other components that need to be efficiently integrated. How are the manufacturers more qualified to do that compared to the system integrators? These installations require a lot of customization which system integrators are well equipped to provide because of their long-term experience in the sector. However, forbidding system integrators from such a great opportunity derails the whole system, forcing lay off and shutting down of companies which is not good for a sector that employs so many skilled workers. Take, for example, the construction of a bridge, do you allow only cement and cable manufacturers to bid and forbid the contractors? Ironically, in a rooftop solar installation, it is the system integrators who ensure the quality and post-installation services.”

Considering the argument of system integrators, it is essential that the MNRE takes their perspective into consideration as they are important stakeholders in the industry.

“This announcement is alarming. Mahindra has been in the forefront of providing engineering and project management services in the solar sector with a strong portfolio. We are also leading the solar pump segment with robust order books. If the intention of the government is to encourage Indian manufacturers, we would support it and will take actions to align ourself with government vision; however, we need justified time. Overnight changes like this disturb the whole ecosystem. At least they should do it in a phased manner and give ample time for the market to adjust. If it is the credentials of the system integrators that is worrying the government, then let them enforce strict eligibility criteria or give time for companies like us to set up manufacturing. The tenders under this scheme are large, and you need the participation of larger integrators like Mahindra. The government could also look at the Andhra government policy of centrally monitoring solar pump installations. But a sudden change like this will not help anyone,” commented Sachin Singh, Business Head – Solar water pumps at Mahindra Susten.

Recently, Energy Efficiency Services Limited (EESL) has issued a tender for 175,000 off-grid solar water pumping systems. The tender states that the solar pumps will be procured through a central agency, in this case, EESL, on behalf of the state nodal agencies (SNAs). These agencies will provide the letter of award to the selected bidders for the installation of the solar-powered water pumps.

The government has begun the process of allocating the capacities to various states under KUSUM program. The capacities have been allocated to several states in line with the demand received from states, the targets listed under the KUSUM program, and the guidelines. These will be applicable for the first year of the program.

Moreover, the Central Electronics Limited of the central government recently invited an Expression of Interest for the empanelment of manufactures of solar water pumps in tenders under the KUSUM program.

Meanwhile, the Solar Energy Equipment Manufacturers Association of Telangana has written a letter to the Minister of Power, R.K. Singh requesting the withdrawal of “the irrational and impractical decision of mandatory usage of the indigenous solar cells in the KUSUM program.”

Image credit: USDA NRCS Montana [Public domain]