Key Takeaways
- Indian solar panel manufacturers are facing significant production disruptions due to delays in sourcing domestic solar cells, with waits of up to eight months.
- The government’s push for domestic manufacturing threatens to undermine India’s solar energy capacity goals and jeopardizes thousands of jobs.
- China controls 95% of India’s solar cell imports, complicating efforts to boost local production amidst export restrictions.
Production Disruptions in India’s Solar Industry
Indian solar panel manufacturers are encountering severe challenges as a result of the government’s initiative to enhance domestic manufacturing. With new regulations implemented on June 1, factories are facing prolonged lead times—up to eight months—for domestic solar cells that need to replace Chinese imports. This situation has led to production halts and reduced operational capacity at numerous facilities, impacting thousands of jobs and investments nearing $4 billion.
Shailendra Shukla, chairman of Icon Solar, indicated that production is expected to plunge from 3.2 GW to approximately 1 GW due to a lack of available components. According to the All India Solar Module Manufacturers Association, nearly one-third of the country’s 140 small to medium solar panel makers, which represent 60% of the manufacturing capacity, have ceased production altogether. Others have drastically reduced output cycles to just three to four days a week.
While the clean energy ministry of India claims it is monitoring the situation, there have not been formal reports regarding production stoppages. Officials believe that adequate cell manufacturing capacity will materialize within six months, but industry insiders dispute this timeline. They assert that it takes time to construct technology-intensive solar cell factories, especially since China has restricted exports of solar manufacturing technology and equipment.
The current shortages are poised to delay solar project deployments and escalate costs, potentially hindering India’s ambitions to increase non-fossil fuel capacity to 500 GW by 2030, from 288 GW today. The growing demand for electricity suggests that any slowdown in solar energy deployment may result in a greater reliance on fossil fuels like coal, further delaying the transition to cleaner energy sources.
Currently, solar energy accounts for about 29% of India’s non-fossil fuel power capacity and is projected to grow from 162 GW to over 292 GW by 2030. Although Indian companies have a solar panel manufacturing capacity of around 200 GW, they only produce 27 GW of solar cells. Effective operational capacity is even lower, estimated at only 16 to 18 GW, according to EUPD Research. This gap in production must be bridged, and experts estimate it could take three to five years to establish sufficient local solar cell manufacturing capacity.
India is heavily reliant on China for solar cells, importing about 95% of its needs. This reliance rose by 37% in the last fiscal year, amounting to nearly $1.86 billion. However, China’s scrutiny of technology exports and equipment sales complicates local manufacturers’ efforts to ramp up production.
At least three companies have temporarily ceased operations due to the lack of domestically produced cells, with others scaling back operations significantly. The current regulations require that by June 2026, only domestically manufactured solar cells be used, but state officials have extended this deadline to December 2026 for certain projects, acknowledging industry concerns over supply shortages.
Manufacturers argue that the timeframes expected by the government do not accurately reflect the complexities involved in establishing production capabilities, which include securing land and sourcing raw materials. Should these domestic production challenges persist, capital expenditure costs for power producers could rise by approximately 35% until local cell manufacturing begins to scale up.
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