An employee from the Electrical Manufacturing Company Ltd. (EMC) walks through the installed solar modules at the Naini solar power plant in the northern Indian city of Allahabad March 21, 2012. REUTERS/Jitendra Prakash Electricity-hungry India is flipping the switch on huge new solar energy projects to fuel its growing economy, using cheap -- mainly Chinese -- foreign technology to reduce once sky-high generation costs to competitive levels.

Since 2010, India has hiked installed solar power capacity from a meagre 17.8 megawatts to more than 2,000MW, official figures show, as part of Prime Minister Manmohan Singh's aim to make "the sun occupy centre-stage" in the country's energy mix.

Key to the progress has been a rapid fall in the cost per unit of solar electricity to close to what is known as "grid parity" -- the cost of conventional electricity generated by carbon-gas emitting coal.

"The world is watching the ability of Indian entrepreneurs to achieve grid parity for solar energy," India's World Bank country director Onno Ruhl said recently.

"India has the potential to be a world leader" and a showpiece for efforts to address climate change, he told an energy seminar in late December.

The drive to harness the sun's power began in earnest with the 2010 creation of the Jawaharlal Nehru National Solar Mission by the current left-leaning government led by the Congress party.

It set a target of generating 20,000MW of grid-connected solar power and 2,000MW of off-grid generation, such as roof panels, by 2022.

That would still represent just one-eighth of India's total installed power base, but the government believes the share will rise as prices for solar infrastructure keep falling.

Power from imported coal and domestically produced natural gas costs around 4.5 rupees a kilowatt-hour while solar energy costs are seven rupees -- down sharply from 18 rupees in 2010, the Ministry of New and Renewable Energy says.

The next stage of expansion will see India build the world's largest solar plant to generate 4,000MW on the shores of a saltwater lake in the northwestern desert state of Rajasthan, which should drive solar power costs even lower.

Operators believe economies of scale from the 280-billion-rupee ($4.4 billion) Sambhar plant to be constructed over the next seven years will reduce prices to 5.0-5.5 rupees a kilowatt-hour.

"This is the first project of this scale anywhere in the world" and "is expected to set a trend for large-scale solar power developments," said Ashvini Kumar, director of Solar Energy Corp, one of five public utilities that will run the plant.

The sprawling project makes it comparable with very large coal-fired power projects.

Greater economies of scale, better technology and progressively cheaper panels and modules that turn sunshine into electricity have hammered down prices.

The price fall was also greased by the global financial crisis, which cut demand for equipment in developed nations, and vast Chinese expansion that created an equipment glut.

All this wrought a transformation in the economics of solar power, making the infrastructure far more affordable, experts say.

India is also still significantly behind many nations in generating solar power. Germany, for instance, has 35,200MW of installed solar capacity, according to the regulatory German Federal Network Agency.

But trailing has proved a boon because it is significantly less costly to set up solar parks now than for the first-movers.

Charanka, in the salt plains of the western state of Gujarat, is currently Asia's biggest solar plant, producing 214MW. Other projects are under way in a string of states from Andhra Pradesh to Madhya Pradesh, Chhattisgarh and Tamil Nadu.

"The seeds have been sown for a rapidly scalable and a very large solar energy sector in the near future," said Arvind Mahajan, infrastructure partner at consultancy KPMG.

What excites solar energy experts about India's prospects is that it is geographically ideal to harness the sun's power because of its abundant sunshine.

India boasts more than 300 sunny days a year in some parts along with large tracts of desert while a big chunk of the nation lies near the equator.

Also, solar parks are far faster and easier to construct than nuclear plants. Charanka, for instance, took just 16 months to build.

With 40 percent of rural Indian households without power there is a huge market. India also urgently needs to generate home-grown power with imports of oil, gas and coal contributing to a trade deficit that has alarmed international investors.

"Solar power could help India address its acute power shortage," Ruhl from the WTO said. India runs a peak-hour electricity shortfall of around 12 percent.

But even though the market is booming, Indian solar-equipment companies have not been profiting.

To build the solar plants India has been importing equipment, mainly from China, but also from the United States and Taiwan. Indian companies say, however, that unless imports are curbed, the country will never develop an indigenous industry.

The commerce ministry has launched a preliminary inquiry into allegations of dumping.

This growth in solar power "should have been a heyday for Indian manufacturers," said Rao S.Y.S. Chodagam, managing director of Titan Energy Systems.

"Instead, there's bankruptcy, loan restructuring and pleas to the government for support against international competition," Chodagam added.