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The U.S. Department of Commerce has imposed a 126% preliminary countervailing duty on Indian solar cells and modules, effectively closing off the lucrative U.S. market and exacerbating overcapacity issues for India’s burgeoning solar sector.
The levies follow a complaint by the Alliance for American Solar Manufacturing and Trade (AASMT), claiming that Indian firms benefited unfairly from government subsidies. AASMT, a coalition that includes U.S.-based First Solar (NASDAQ:FSLR) and Mission Solar as well as China’s Hanwha Qcells, filed petitions in July 2025 alleging that solar imports from India, Indonesia, and Laos benefited from unfair government subsidies. 
More specifically, AASMT alleged that Indian solar firms received state support through various programs, including the Advance Authorisation Program, Duty Drawback Program and Export Promotion of Capital Goods (EPCG) Scheme. Major Indian solar stocks, including Adani Green Energy, Waaree Energies, Premier Energies and Vikram Solar, saw their share prices crash following the announcement.
Related: Britain Reconsiders 78% North Sea Oil Tax as Investment Slows
The Trump tariffs could not have come at a worse time for India’s solar sector: Indian solar imports to the U.S. have rocketed over the past couple of years, growing from $84 million in 2022 to nearly $793 million in 2024, thanks in large part to Prime Minister Modi’s flagship production-linked incentive scheme (PLI). Launched in April 2020, PLI provides financial incentives, typically 4% to 6% of incremental sales with 2020 as the base year, to companies for manufacturing goods within India in a bid to encourage industrial production growth.
The scheme mainly targets strategic sectors such as renewable energy, automobiles, electronics and pharmaceuticals. Unlike upfront subsidies, the incentives are paid out only after companies meet specific, predetermined annual thresholds for increased production and sales. The financial benefits are generally paid over a period of 4 to 6 years. The subsidies are designed to help India cut reliance on Chinese solar imports as the country attempts to meet its target to have at least 500 gigawatts installed renewable capacity by 2030.
The tariffs are likely to present a major roadblock to India’s roaring solar sector with India’s solar manufacturing capacity having grown 13-fold since 2020. India’s solar module manufacturing is already experiencing significant overcapacity, with the current capacity of ~160 GW vastly outpacing annual domestic demand at 45-50 GW. India primarily exports solar modules and cells to the United States, which accounted for more than 90% of total exports in 2024. Driven by anti-dumping duties on Chinese goods, U.S. developers have been prioritizing non-Chinese, ethically sourced panels, which has significantly increased demand for Indian solar products.

Source: Bloomberg
Thankfully, India’s solar sector has a couple of workarounds to help it navigate the tariff shocks.
First off, Indian solar firms are accelerating efforts to pivot toward Europe, the Middle East and other emerging economies as they look to lower overreliance on the U.S. market. Manufacturers like Premier Energies are explicitly targeting European buyers as the region seeks to diversify its supply chains away from China, while Waaree Energies is developing Middle East supply chains, including a planned facility in Oman, in a bid to bypass direct export barriers.
Second, Indian firms are increasing their manufacturing footprint inside the United States, allowing them to supply the U.S. market directly and bypass U.S. tariffs. Waaree has already built 2.6 GW of module manufacturing capacity in the United States, and plans to expand it to approximately 4.2 GW by the end of the year. This includes operations in Texas and the acquisition of Meyer Burger’s facility in Arizona. Vikram Solar has established a manufacturing presence in the U.S. and has continued to build its U.S.-based operational capacity as it looks to support its 9.5 GW global capacity goals. Meanwhile, other Indian firms, including Grew Energy, ReNew Power, Navitas, Solex Energy, and Saatvik Energy are either setting up or pursuing supply chain establishments in the U.S.
Finally, the Indian government is facilitating the ability of solar manufacturers operating within Special Economic Zones (SEZs) to sell their products into the Domestic Tariff Area (DTA), essentially shifting from an “export-only” model to enabling supply to the growing domestic market. The government introduced relief measures in the 2026/2027 Union Budget to facilitate sales from Special Economic Zone (SEZ) units into the domestic market at concessional duty rates.
This policy aims to help manufacturers, including solar and semiconductor firms, absorb excess capacity caused by global trade disruptions. Eligible SEZ units can now sell a portion of their output to the Domestic Tariff Area (DTA) at reduced duty rates, whereas they previously had to pay full import duties on finished goods. These sales are, however, capped at a specific proportion of their exports to maintain a level playing field for non-SEZ manufacturers. 
Further, solar modules sold domestically must still comply with the Approved List of Models and Manufacturers (ALMM) and the newly mandated domestic content requirements (DCR) for solar cells, effective from June 1, 2026.

By Alex Kimani for Oilprice.com
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