India’s solar sector will undergo a structural shift on 1 June 2026, when the government mandates the use of domestically manufactured solar cells and modules under the Approved List of Models and Manufacturers (ALMM)
framework. From that date, most grid-connected solar projects must use modules listed under ALMM List-I and cells listed under ALMM List-II, effectively enforcing Domestic Content Requirement (DCR) compliance. (Press Information Bureau) The objective is clear: build a fully domestic solar manufacturing
ecosystem—from cells to modules—and reduce dependence on imports.
But the policy also raises a fundamental question:
Is India accelerating manufacturing capability—or increasing the cost of solar adoption?
The Policy Logic: Building an Atmanirbhar Solar Supply Chain
India currently imports large portions of the solar value chain, especially solar cells and wafers.
The ALMM-II mandate aims to correct this imbalance by guaranteeing demand for locally produced solar cells. From June 2026 onward, module manufacturers supplying the Indian market must procure cells from approved domestic manufacturers, ensuring traceability and domestic value creation.
The policy therefore serves multiple strategic goals:
- Reduce reliance on Chinese supply chains
- Encourage domestic cell manufacturing
- Support investments made under government incentives such as PLI
- Improve supply chain security
In theory, this should create a vertically integrated solar manufacturing ecosystem in India.
In practice, however, the transition could be turbulent.
The Price Reality: DCR Modules Still Cost More
Despite multiple government incentives—including subsidies, import protection, and demand guarantees—DCR modules remain significantly more expensive than imported alternatives.
This price gap exists for several reasons:
- Domestic cell manufacturing capacity is still limited.
- India lacks large-scale wafer and polysilicon production.
- Manufacturing scale is smaller compared to Chinese mega-factories.
As a result, project developers expect solar tariffs to increase slightly in the short term until domestic manufacturing capacity expands.
This has created frustration within the EPC and rooftop solar ecosystem, which argues that manufacturers received extensive government support but have not passed sufficient cost reductions to the market
The DCR policy becomes more controversial when viewed alongside the substantial incentives provided by the Government of India to solar manufacturers over the past few years.
For example:
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The Government approved over ₹24,000 crore under the Production Linked Incentive (PLI) scheme to support integrated solar PV manufacturing.
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Import protection through Basic Customs Duty (BCD) of 40% on solar modules and 25% on solar cells was introduced in 2022 to protect domestic manufacturers.
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Several states have provided capital subsidies, cheap land, electricity tariff concessions, and tax exemptions to solar manufacturing units.
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The ALMM mechanism effectively guarantees domestic manufacturers a large captive market for government and grid-connected projects.
Despite these protections and incentives, DCR modules in India still typically cost ₹6–₹10 per watt more than imported modules.
To put this into perspective:
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Imported modules (historically): ₹13–₹17 per watt
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Domestic DCR modules: ₹18–₹27 per watt
For a typical 1 MW solar project, this difference alone can increase project cost by ₹6–₹10 crore.
For smaller installations:
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A 5 kW residential rooftop system could become ₹25,000–₹40,000 more expensive due to the DCR requirement.
This price gap has led many developers and EPC companies to question whether the benefits of government incentives are being fully passed on to the end market.
“When manufacturers receive ₹24,000 crore in PLI incentives, 40% import protection, and guaranteed market access through ALMM, the expectation from the industry is clear—cost competitiveness should improve faster.”
India currently has ~120 GW module manufacturing capacity but only ~30 GW cell capacity, which explains the supply bottleneck driving prices higher.
The US Tariff Shock: A Game Changer for the Indian Solar Market
While India is tightening domestic sourcing rules, a parallel development is unfolding internationally.
The United States has imposed countervailing duties of roughly 126% on solar cells and modules imported from India, citing alleged government subsidies.
The impact is substantial because:
- More than 95% of India’s solar exports go to the United States.
- The duties could make Indian modules around 30% more expensive in the US market, effectively destroying their price competitiveness.
For Indian manufacturers, this creates a serious dilemma:
If exports collapse, where will the production go?
Most likely, the answer is the domestic market.
Possible Impact on Solar Panel Prices in India
The US tariffs combined with the DCR mandate could produce two contradictory effects on Indian module prices.
Scenario 1: Prices May Fall (Oversupply)
If exports to the US decline sharply, manufacturers may redirect inventory to India.
India already has rapidly expanding manufacturing capacity, estimated well above domestic demand levels. (Reuters)
This could lead to:
- module oversupply in India
- aggressive pricing by manufacturers
- downward pressure on panel prices
Some analysts believe the domestic market may experience temporary price corrections as manufacturers compete to sell excess production.
Scenario 2: Prices May Stay High (Policy-Driven Demand)
However, the DCR mandate restricts the use of imported modules.
This means:
- domestic manufacturers face limited foreign competition
- developers have fewer sourcing options
If domestic cell production fails to keep pace with demand, the result could be:
- supply shortages
- higher module prices
- delayed solar projects
Which scenario ultimately plays out will depend largely on how quickly India scales its cell manufacturing capacity.
Impact on Individuals Installing Rooftop Solar After June 2026
For homeowners planning rooftop solar systems, the impact will be noticeable but not dramatic.
Potential Challenges
Higher upfront installation cost
If module prices remain elevated, a typical 5 kW rooftop system may become slightly more expensive.
Limited panel options
Consumers will have fewer module brands compared to the global market.
Potential Advantages
However, the policy also offers benefits.
Better subsidy eligibility
Most government solar programs already require DCR-compliant modules.
Quality assurance
ALMM certification ensures traceability and manufacturing quality standards.
Stronger domestic service network
Local manufacturers can provide better warranty support and faster replacement.
Overall, rooftop solar will remain financially attractive because electricity tariffs continue to rise.
Impact on Commercial and Industrial (C&I) Solar Projects
Commercial solar buyers—factories, warehouses, malls, and IT parks—may feel the policy impact more strongly.
These projects are extremely sensitive to module prices because:
- they operate at much larger scale
- payback calculations are highly cost-dependent
Possible outcomes include:
Higher CAPEX
Large solar installations could see noticeable cost increases if DCR modules remain expensive.
Longer Payback Period
The return on investment for C&I solar projects may extend by 1–2 years in some cases.
Greater Supply Certainty
On the positive side, domestic manufacturing could reduce dependence on imported panels and global shipping disruptions.
The Bigger Question: Industrial Policy vs Solar Adoption
India’s DCR mandate reflects a broader global trend.
Countries around the world—including the US and EU—are now using industrial policy to localize clean energy supply chains.
But there is always a trade-off.
Policies that support domestic manufacturing often increase costs for consumers in the short term.
The success of India’s solar strategy will depend on whether domestic manufacturers can quickly:
- scale production
- improve efficiency
- reduce prices
If that happens, the DCR mandate could transform India into a global solar manufacturing hub.
If it does not, the policy risks slowing the pace of solar adoption at a time when India is racing toward its renewable energy targets.
Conclusion
The June 2026 DCR mandate marks a turning point for India’s solar sector.
Combined with global trade tensions—particularly the 126% US tariffs on Indian solar exports—the policy will reshape the market in three key ways:
- Strengthen domestic manufacturing
- Redirect export-focused production toward India
- Potentially reshape solar module pricing dynamics
For consumers and companies installing solar, the short-term reality may involve slightly higher costs but stronger domestic supply chains.
The long-term outcome will depend on one critical factor:
Whether India’s solar manufacturers can deliver global-level pricing with domestic production.