From June 1, India has introduced a major change in its solar policy that could reshape the industry. The government now requires certain solar projects to use only domestically manufactured solar cells, a move aimed at reducing dependence on Chinese imports and strengthening local manufacturing.
While the policy is being welcomed by some industry players as an important step towards self-reliance, others fear it could lead to higher costs, supply shortages and added pressure on smaller manufacturers.
Solar panels are made through a multi-step process. Solar cells, which convert sunlight into electricity, are the key building blocks inside every panel.
India has already made it mandatory for many projects to use locally manufactured solar modules. The new rule takes that requirement a step further.
From June 1, the solar cells inside those modules must also be sourced from government-approved Indian manufacturers listed under the Approved List of Models and Manufacturers (ALMM) List-II.
The rule applies to rooftop solar projects connected through net-metering systems, including those installed under the PM Surya Ghar: Muft Bijli Yojana. It also covers open-access solar projects used by businesses and industrial consumers.
Despite requests from developers for more time, the government has decided to move ahead with the deadline.
The main goal is to build a stronger domestic solar manufacturing ecosystem.
India has rapidly expanded its solar module manufacturing capacity and can now produce nearly 200 GW of modules every year. However, solar cell manufacturing remains much smaller, at around 30 GW annually.
As a result, many modules assembled in India still rely on imported cells, with China supplying the majority of them.
The government believes the new rule will encourage more investment in local cell production and help India become less dependent on imports over the long term.
The biggest concern for consumers is cost.
Industry estimates suggest rooftop solar systems could become around Rs 3,000 per kilowatt more expensive because Indian-made solar cells currently cost more than imported alternatives.
For a household installing a 5-kW rooftop system, that could mean paying roughly Rs 15,000 extra.
Some companies warn that costs could rise even further if demand increases faster than domestic production capacity.
People installing systems under the PM Surya Ghar scheme will continue to receive government subsidies, but compliance checks and paperwork requirements may become stricter.
Even so, industry experts point out that solar power remains attractive because it helps households and businesses save on electricity bills for many years.
However, the concern comes down to supply.
Industry estimates suggest India currently has solar cell manufacturing capacity of around 25-30 GW, while annual demand is close to 50 GW.
For years, imports have filled this gap. With imported cells no longer allowed for many projects, some manufacturers fear shortages in the market.
Smaller module makers are particularly worried because they do not manufacture solar cells themselves. Instead, they depend on purchasing cells from larger companies that produce both cells and modules.
Many believe this could give bigger manufacturers greater control over pricing and supply.
According to industry executives, domestic cell manufacturers already enjoy strong pricing power because supplies are limited. Rising demand could strengthen their position further.
On the other hand, smaller manufacturers may be the most affected, opine industry experts. Manufacturers say modules built using domestic cells are significantly more expensive than those using imported cells.
At the same time, several standalone module assembly plants are reportedly operating well below capacity because of weak demand and excess production capability.
Some industry leaders expect the new rules to accelerate consolidation, with larger integrated companies gaining market share while smaller firms struggle to compete.
Meanwhile, the policy could help create a stronger domestic manufacturing base over time. However, in the short term, it may bring higher costs and fresh challenges for parts of the industry.
Whether the transition proves smooth or difficult will depend largely on how quickly domestic solar cell production expands to meet the country’s growing demand for clean energy.