India tweaks solar rules to cut China dependence, manufacturers divided

Anyone planning to install rooftop solar panels may have to spend a little more from June 1. A major change in India's solar sector has come into force. From now on, solar projects connected through net-metering and open-access arrangements can use only domestically manufactured solar cells. The government says the move will strengthen India's solar manufacturing ecosystem and reduce dependence on imports, particularly from China. But for consumers, developers and hundreds of smaller manufacturers, the transition may not be painless. The immediate impact is likely to be higher installation costs, tighter supply and increased pressure on companies that depend on imported solar cells.

What Exactly Changes From June 1?

To understand the new rule, it helps to know how a solar panel is made. The manufacturing chain starts with polysilicon, which is converted into ingots and wafers. These wafers are then used to manufacture solar cells -- the component that converts sunlight into electricity. Multiple cells are assembled into a solar module, or the panel that consumers see on rooftops. India already required developers to use domestically manufactured solar modules. From June 1, the rule goes a step further. Now, the cells inside those panels must also come from government-approved Indian manufacturers under the Approved List of Models and Manufacturers (ALMM) List-II framework. The rule applies to rooftop solar projects under net-metering arrangements, including installations under the PM Surya Ghar: Muft Bijli Yojana. It also covers open-access projects used by commercial and industrial consumers. Despite requests from developers for more time, the government has made it clear that there will be no blanket extension.

Why Is The Government Doing This?

The objective is straightforward. India wants to build a complete domestic solar manufacturing supply chain instead of relying heavily on imports. At present, India has built a massive solar module manufacturing capacity of nearly 200 GW annually. However, its solar cell manufacturing capacity is only around 30 GW. That gap means a large share of modules assembled in India still depend on imported cells, most of them sourced from China. The government believes the new mandate will encourage investments in domestic cell manufacturing, improve self-reliance and strengthen India's clean-energy ambitions.

What It Means For Consumers?

The biggest impact will likely be on costs. Industry estimates suggest rooftop solar installations could become around Rs 3,000 per kilowatt more expensive because domestically manufactured cells cost significantly more than imported alternatives. For a typical 5-kW rooftop system, that could translate into an additional expense of roughly Rs 15,000. Some industry players warn that prices could rise further if domestic supplies remain tight. Consumers opting for government subsidies under the PM Surya Ghar scheme will continue receiving financial support. However, compliance requirements and documentation checks are expected to become stricter. The good news is that solar remains financially attractive over the long term because electricity savings continue for years after installation.

Why Is The Industry Worried?

The concern boils down to one number. India's demand for solar cells is far higher than its current production capacity. Industry bodies estimate domestic cell manufacturing capacity at around 25-30 GW, while annual demand is close to 50 GW. More than 90 per cent of India's solar cell requirements have traditionally been met through imports. This creates a potential supply crunch. Smaller solar module manufacturers are particularly worried because they do not manufacture cells themselves. They now have to buy cells from larger integrated players that produce both cells and modules. Many fear this could create an uneven playing field.

Industry executives say domestic cell manufacturers currently enjoy strong pricing power because supplies are limited. Margins in some cases are estimated to be between 20 per cent and 30 per cent. As demand rises under the new mandate, those margins could become even stronger.

Could Smaller Manufacturers Suffer?

That is one of the biggest fears. Industry insiders say more than 125 module manufacturers and hundreds of ancillary businesses could face pressure if cell supplies remain constrained. The economics are already becoming difficult. Manufacturers say modules built using domestic cells are substantially more expensive than those using imported cells. As the June 1 deadline approached, the price gap widened sharply.

With capacity utilisation at several module assembly plants reportedly hovering around 30-40 per cent, many standalone manufacturers are already struggling with weak demand and excess capacity. The new sourcing requirement could intensify those challenges. Some executives even predict consolidation across the sector, with stronger integrated manufacturers gaining market share while smaller firms struggle to survive.

Not Everyone Sees A Problem

There is another side to the debate. Several manufacturers support the government's decision and argue that the concerns are being overstated. Their argument is that a large portion of utility-scale solar projects bid out before August 31, 2025, have been exempted from the domestic cell sourcing requirement. That exemption reduces immediate pressure on domestic cell supplies. Supporters also say India needs a strong policy signal to justify billions of rupees being invested in domestic solar manufacturing facilities. According to them, temporary disruptions are a necessary price for building a self-sufficient solar industry.