New Delhi: People planning to install rooftop solar systems may see costs increase slightly from June 1, following the implementation of a significant policy change in India’s solar sector. Under the new rules, solar projects operating through net-metering and open-access mechanisms can now use only solar cells manufactured within India. The government says the measure is aimed at strengthening domestic solar manufacturing and reducing reliance on imports, particularly from China. However, the transition could pose challenges for consumers, project developers and smaller manufacturers, with higher installation costs and possible supply constraints expected in the short term.
What Has Changed From June 1?
A solar panel’s manufacturing process begins with polysilicon, which is converted into ingots and wafers. These wafers are then used to produce solar cells, the component responsible for converting sunlight into electricity. Multiple cells are assembled to form a solar module, commonly known as a solar panel. While India had already mandated the use of domestically manufactured solar modules, the new rule extends that requirement to the cells inside the modules as well. These cells must now be sourced from government-approved Indian manufacturers listed under the Approved List of Models and Manufacturers (ALMM) List-II. The requirement applies to rooftop solar systems installed under net-metering arrangements, including those under the PM Surya Ghar: Muft Bijli Yojana, as well as open-access projects serving commercial and industrial users. Despite appeals from industry stakeholders for additional time, the government has indicated that there will be no broad extension of the deadline.
Why Has The Government Introduced This Rule?
The policy is part of India’s broader effort to create a fully integrated domestic solar manufacturing ecosystem. Although the country has developed an annual solar module manufacturing capacity of nearly 200 GW, its solar cell production capacity remains much lower at around 30 GW. As a result, many modules assembled in India still rely on imported cells, largely sourced from China. The government believes the new mandate will encourage investments in local cell manufacturing, improve self-reliance and support the country’s renewable energy goals.
How Could Consumers Be Affected?
Industry estimates indicate that rooftop solar installations could become costlier by roughly Rs 3,000 per kilowatt because locally manufactured cells are more expensive than imported alternatives. For a standard 5-kW rooftop system, this may increase costs by around Rs 15,000. Some industry participants caution that prices could rise further if domestic supply remains limited. Consumers availing benefits under the PM Surya Ghar scheme will continue to receive subsidies, although compliance and documentation requirements are expected to become more stringent. Despite the higher upfront cost, solar power is still considered financially beneficial in the long run due to continued savings on electricity bills.
Why Is The Industry Concerned?
A key concern is the mismatch between demand and domestic manufacturing capacity. Industry estimates place India’s solar cell production capacity at about 25–30 GW annually, while demand is estimated to be close to 50 GW. Historically, more than 90 per cent of the country’s solar cell requirements have been met through imports. This raises concerns about potential shortages. Smaller solar module manufacturers, in particular, are worried because they do not produce cells themselves and must now procure them from larger companies that manufacture both cells and modules. Many believe this could put smaller players at a disadvantage.
Industry representatives also point out that limited domestic supply has given local cell manufacturers considerable pricing power. Profit margins in some cases are estimated at 20–30 per cent, and these could increase further as demand rises under the new regulations.
Will Smaller Manufacturers Face Greater Challenges?
Many in the industry believe so. According to sector insiders, more than 125 module manufacturers and numerous ancillary businesses could come under pressure if cell availability remains restricted. The cost difference between modules made with domestic cells and those using imported cells has widened in recent months, making business conditions more difficult. With utilisation levels at several module assembly plants reportedly in the 30–40 per cent range, many standalone manufacturers are already dealing with excess capacity and subdued demand. The new sourcing norms may add to these difficulties. Some industry observers expect the sector to witness consolidation, with larger integrated manufacturers strengthening their position while smaller firms face increasing challenges.
Is There Support For The Policy?
Not all industry stakeholders view the change negatively. Several manufacturers have backed the government’s decision, arguing that concerns about supply shortages may be overstated. They note that many utility-scale solar projects awarded before August 31, 2025, have been exempted from the domestic cell sourcing requirement, which could ease immediate pressure on local production capacity. Supporters also argue that strong policy measures are necessary to encourage large-scale investment in domestic solar manufacturing. In their view, any short-term disruptions are a reasonable trade-off for building a more self-reliant and resilient solar industry in the long term.
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