The report notes that tightening policies in the US could impact India’s module exports, although the medium-term outlook remains promising, provided Indian players manoeuvre compliance and maintain cost competitiveness. A relatively nascent supply chain in the US and progressive decoupling with China may bode well for Indian exporters in the medium term, given that the margins for modules complying with Domestic Content Requirement criteria (DCR modules) in the US market are nearly 2-3 times those of domestic margins.

The report highlights that the reduction in GST rates could lead to project cost savings of 4-5% owing to a reduction in landed costs of non-DCR and DCR modules by 1.0-1.2 cents/Wp and 1.3-1.6 Cents/Wp, respectively, potentially lowering plain vanilla solar tariffs by ₹0.06-0.10 per unit in the near-term. However, it noted that mandatory domestic cell procurement under the Approved List of Models and Manufacturers for solar cells (ALMM-II) is likely to push plain vanilla solar tariffs higher by ₹0.30-0.40 per unit from prevailing levels of ₹2.5 per unit, given the prevailing price differential of 5-6 cents for DCR modules vis-à-vis non-DCR modules.

“The solar equipment manufacturing sector has several tailwinds, including robust domestic demand outlook, maturing module capacities, favourable government policies, and improved financing avenues for the RE sector. However, nascent integration of solar equipment capacity, supply chain dependence on China, uncertainty shrouding export prospects, and lagging RE capacity additions due to systemic issues are some headwinds that remain monitorable over the medium term,” said Jatin Arya, Director, CareEdge Ratings.

CareEdge Ratings also notes that recent volatility in input prices driven by supply chain shifts in China underscores the need for further backward integration, which is being headlined by major Indian players with a wafer capacity pipeline of over 30 GWp, entailing a capex of over ₹20,000 crore. Moreover, the Indian government proposes to provide another demand trigger with the implementation of ALMM-III for ingot/wafer capacity, effective from June 1, 2028.

“While domestic procurement mandates are crucial for incentivising backward integration in local manufacturing, policymaking needs to strike a balance between supply chain independence and energy security at competitive costs,” Arya said.

India’s solar manufacturing

India’s solar manufacturing to surge: Module capacity seen at 200 GWp, cells at 100 GWp by FY28