Local Solar Cell Mandate in India: Impact on Renewable Energy and Domestic Manufacturing

Context:

From 1 June 2026, the Ministry of New and Renewable Energy (MNRE) has made the use of domestically manufactured solar cells mandatory for all new open-access, net-metering, and government-subsidized solar projects under the Approved List of Models and Manufacturers (ALMM) framework.

Objective of the Policy:

• • • Reducing Import Dependence: India's solar sector has historically relied heavily on imported solar cells and modules, particularly from China. The policy seeks to reduce this strategic and economic dependence and strengthen India's energy security.
    • Promoting Domestic Manufacturing: The mandate aims to provide an assured market for domestic solar cell manufacturers, especially those established under the Production Linked Incentive (PLI) Scheme, thereby encouraging investment in local manufacturing capacity.
    • Ensuring Policy Consistency: The move reinforces the government's commitment to the vision of Atmanirbhar Bharat (Self-Reliant India) and signals long-term policy stability for investors in the renewable energy manufacturing ecosystem.

Major Challenges Arising from the Policy:

Severe Demand–Supply Mismatch

Capacity Gap

India currently possesses approximately 200 GW of annual solar module assembly capacity, but its actual domestic solar cell manufacturing capacity is only about 30 GW.

Supply Shortage

With annual solar demand estimated at nearly 50 GW, the policy creates an immediate supply deficit of around 20 GW, as domestic cell production remains insufficient to meet market requirements.

Financial and Economic Implications

Increase in Project Costs

Limited availability of domestic solar cells and the premium attached to them have pushed module prices from approximately ₹21–22 per watt to ₹25–27 per watt. As a result, overall project costs could rise by as much as 30 percent.

Pressure on Consumer Tariffs

Higher project costs may eventually be passed on to consumers and distribution companies (DISCOMs), potentially increasing electricity tariffs by 30–40 paise per unit. This could reduce the competitiveness of solar energy relative to other sources.

Impact on Renewable Energy Targets

Risk of Slower Deployment

India has set an ambitious target of achieving 500 GW of non-fossil fuel energy capacity by 2030. Supply constraints and rising costs may slow the implementation of rooftop solar initiatives such as the PM Surya Ghar Muft Bijli Yojana and other renewable energy projects.

Way Forward

Phased Implementation

Instead of imposing a blanket requirement immediately, the government could have adopted a phased approach, linking mandatory domestic sourcing requirements to the gradual expansion of local manufacturing capacity.

Support for Technology and Capital

Protection alone cannot ensure global competitiveness. Domestic manufacturers need financial support for research and development (R&D) in advanced solar technologies such as:

• • TOPCon (Tunnel Oxide Passivated Contact) cells
  • HJT (Heterojunction Technology) cells

Such investments are essential to improve efficiency and compete with global manufacturers.

Practical and Transparent Relief Measures

The MNRE's provision for case-by-case relief to projects nearing grid connectivity should be implemented transparently and expeditiously. This would help prevent delays, cost overruns, and stranded investments.

Conclusion:

The domestic solar cell mandate is a significant step toward energy security and self-reliance. However, its success will depend on balancing support for domestic manufacturing with the need to sustain rapid solar deployment and achieve India's clean energy targets.