The Ministry of International Trade and Industry plans to scrap government subsidies for solar power generation equipment for household use at the end of fiscal 2002 in order to boost competition in the industry, ministry sources said Wednesday.

The ministry has already begun sounding out manufacturers on its intention to terminate the subsidy system by March 2003, the sources said.

The ministry started subsidizing household purchases of solar power generation equipment in fiscal 1994. However, it now thinks there is less of a need for subsidies because advances in technology have led to lower prices.

The ministry hopes that by withdrawing the subsidies, manufacturers will be encouraged to become price competitive.

The subsidies, used to cover up to half the total cost of buying and installing solar power generation equipment, rose from 2 billion yen in fiscal 1994 to 16 billion yen in fiscal 1999.

In fiscal 2000, however, the ministry changed its stance with the aim of boosting price competition among manufacturers and began covering costs based on the generating power of the equipment. It also cut the budget to 14.5 billion yen.

The ministry is considering a further cut in subsidies in fiscal 2001.

Before the subsidies were introduced, it cost roughly 4 million yen on average to generate 1 kw of electricity through solar power. That figure recently stands at about 800,000 yen, ministry officials said.

MITI predicts that if the cost could be shaved to approximately 400,000 yen, solar power could compete with the electricity provided by electric power firms. Manufacturers will be able to achieve this additional cost reduction by the time the subsidies are scrapped, officials say.

However, some say it is too early to end the subsidies and that the ministry should continue to promote solar power and other sustainable energy sources to prevent global warming.

The government has a goal of generating 5 million kw of electricity through solar power in fiscal 2010, which ends in March 2011. As of March, the figure amounted to a scant 200,000 kw.

MITI officials said further efforts on the part of manufacturers to cut their prices is essential to meet the target figure.