India’s decision to include solar cells under the Approved List of Models and Manufacturers (ALMM) starting June 1, 2026, is expected to drive up the costs of solar projects in the short term. Analysts predict that the move will impact project timelines, inflate capital costs, and lead to higher solar tariffs until domestic manufacturing catches up with demand.
Short-Term Cost Pressures and Tariff Increases
According to Crisil Market Intelligence and Analytics, the prices of Indian-manufactured solar cells are currently 1.5 to 2 times higher than Chinese alternatives, even after factoring in basic customs duties. These elevated prices could raise the capital cost of solar projects by Rs 5-10 million per MW. Consequently, solar tariffs might increase by 40-50 paise per unit as developers seek to offset higher costs.
Similarly, CareEdge Ratings noted that the introduction of ALMM-II for domestic cells could increase the delivered cost of domestic modules by 6-7 cents per Watt-Peak (Wp). This increase is likely to result in solar tariffs rising by 40-50 paise per unit in the short term, until domestic cell production scales up to meet demand.
Challenges for Non-Integrated Players
The ALMM cell mandate poses significant challenges for companies that lack integrated cell manufacturing capabilities. Of the 62 GW of installed solar capacity as of December 2024, owned by 79 entities, only 13 companies have integrated cell manufacturing. The remaining players will need to either expand their capacity or compete for limited domestic cell supplies.
Surbhi Kaushal, Associate Director at Crisil Market Intelligence and Analytics, stated, “Although 12 non-integrated players have announced plans to install 32 GW of capacity by 2029, the higher capital costs of cell manufacturing compared to module assembly lines, combined with falling prices in the solar value chain, may slow progress.”
Domestic Supply vs. Import Challenges
India’s domestic solar cell manufacturing capacity is expected to grow significantly, increasing from 10 GW in March 2024 to 43-47 GW by June 2026, according to Crisil estimates. The average annual demand for solar cells is projected to be 40-45 GW between FY 2027 and FY 2030.
However, as of September 2024, the capacity listed under ALMM-I reached 60 GW, with much of it still ramping up. This capacity barely meets the demand for domestic modules, creating potential supply gaps.
Impact of Customs Duties and Import Trends
The government has imposed basic customs duties of 25% on Chinese solar cells and 40% on Chinese modules. This policy raises the landed cost by 4-5 cents per Wp for imported modules and 1-2 cents per Wp for imported cells. Despite this, modules that meet the Domestic Content Requirement (DCR) remain more expensive than both imported and non-DCR modules, according to CareEdge.
In FY24, module imports surged to $4.35 billion due to the anticipated implementation of ALMM-I. However, imports moderated in the first half of FY25, totaling $1.02 billion compared to $1.14 billion during the same period in FY24. Cell imports also showed a similar trend, peaking at $1.85 billion in FY24 before falling to $0.74 billion in the first half of FY25, likely due to increased domestic production.
The Road Ahead
While the ALMM policy aims to boost domestic manufacturing, industry experts warn of short-term disruptions. The gap between current cell production and demand, combined with higher costs, could impact project timelines and competitiveness at solar power auctions.
Despite these challenges, the long-term outlook remains positive. With investments and capacity expansions underway, India’s solar cell manufacturing is expected to stabilize, reducing reliance on imports and supporting the country’s ambitious renewable energy targets.
For the industry to navigate this transition successfully, non-integrated players may need to accelerate their investments in cell manufacturing. Policymakers will also need to ensure that supply chain bottlenecks are addressed promptly to support the growth of India’s solar sector.
