Technology Desk, New Delhi. From June 1, India has made a major change in its solar policy which can give a new look to this entire industry. The government will now require the use of only domestically manufactured solar cells for certain solar projects. The main target of this step is to reduce dependence on Chinese imports and strengthen local manufacturing.
While the policy is being welcomed by some big players in the industry as a big step towards self-reliance, others fear it could increase costs, reduce supply and put pressure on smaller manufacturers.
What has changed?
Solar panels are made through a multi-step process. Solar cells, which convert sunlight into electricity, are the main building blocks inside every panel.
India has already made the use of locally made solar modules mandatory for many projects. The new rule takes this requirement one step further.
From June 1, the solar cells inside those modules must also be sourced from government-approved Indian manufacturers, who are listed under the Approved List of Models and Manufacturers i.e. ALMM List-II.
This rule applies to rooftop solar projects connected to net-metering systems, including those installed under the PM Surya Ghar: Free Electricity Scheme. It also covers open-access solar projects used by business and industrial consumers.
Despite developers asking for a little more time, the government has decided not to extend the deadline and go ahead with it.
Why is the government making these changes?
Its main goal is to create a strong domestic solar manufacturing ecosystem. India has rapidly expanded its solar module manufacturing capacity and can now produce about 200 GW modules every year. However, the scale of solar cell manufacturing is still quite small, amounting to only around 30 GW annually.
As a result, many modules assembled in India are still dependent on imported sales, the majority of which are supplied by China.
The government believes that the new rule will encourage more investment in local cell production and help India be less dependent on imports in the long term.
According to some experts, ‘Although there may be some challenges in the short term regarding sales availability and pricing, its long-term benefits far outweigh these concerns. This step is expected to increase demand for domestically manufactured solar cells and will support the government’s vision of creating a self-reliant and globally competitive solar industry while ensuring quality and energy security.’
Consumers may also be affected
The biggest concern for consumers is its cost.
Industry estimates suggest that rooftop solar systems could be costlier by around Rs 3,000 per kWh as Indian-made solar cells are currently more expensive than imported alternatives.
For a home user, installing a 5-kW rooftop system could mean an additional expense of around Rs 15,000.
Some companies are warning that if demand grows faster than domestic production capacity, costs may increase further.
People installing systems under the PM Surya Ghar Yojana will continue to receive government subsidies, but the requirements for compliance checks and paperwork may now be more strict than before.
Despite this, industry experts say solar power is still quite attractive because it helps homes and businesses save on electricity bills for many years. However, the real concern is about supply.
Industry estimates suggest that the current solar cell manufacturing capacity in India is around 25-30 GW, while the annual demand is around 50 GW.
For years this gap has been filled through imports. Now, with imported sales not being allowed for many projects, some manufacturers are fearing shortage in the market.
Small module makers are particularly concerned because they don’t manufacture solar cells themselves. Instead, they rely on purchasing cells from larger companies that make both cells and modules.
Many believe that this can give big manufacturers more control over pricing and supply.
According to industry executives, domestic cell manufacturers already have strong pricing power as supply is limited. Increasing demand can further strengthen their position.
On the other hand, industry experts are of the opinion that small manufacturers may be most affected by this. Manufacturers say that modules made using domestic cells are much more expensive than modules made from imported cells.
Additionally, many standalone module assembly plants are reportedly operating well below their capacity due to weak demand and excess production capacity.
Some industry leaders expect the new rules to accelerate consolidation in the sector, increasing the market share of large integrated companies while smaller firms will struggle to compete.
Meanwhile, these policies can help build a strong domestic manufacturing base over time. However, in the short term, it could bring higher costs and new challenges for some parts of the industry.
How easy or difficult this transition proves to be will largely depend on how fast domestic solar cell production increases to meet the country’s growing demand for clean energy.
