Supply Crisis Hits Solar Panel Industry in India, Project Delays Expected

Supply Chain Crisis: Solar PV Components in Short Supply, Approved Projects Delayed!

India’s Prime Minister Narendra Modi’s ambitious “Solar Rooftop Program” once captured global attention, but it is now mired in a paradox of “local manufacturing” due to a supply chain crisis.

Only a Fraction of the Target Achieved

In February 2024, Prime Minister Modi announced the “Pradhan Mantri Surya Jyoti Yojana: Free Electricity Program”, aimed at subsidizing the installation of rooftop solar PV systems for Indian households. The goal was to install solar rooftop systems in 35 million households within three years. The government intended to promote the use of renewable energy and reduce electricity costs through various incentives.

However, over a year has passed, and progress has been slow. Recent data indicates that only over 1 million households have installed rooftop solar systems, leaving a gap of more than 80% from the target for the fiscal year 2026. This stark contrast highlights that only about 10% of the goal has been achieved, with the Parliamentary Energy Standing Committee noting significant challenges faced by the Ministry of New and Renewable Energy in reaching this target.

Component Supply Shortages: The Main Culprit?

China used to be a major supplier of solar PV components to India. However, due to the US-China trade tensions and changes in tariff policies, the cost of importing components from China has risen. In November 2024, the US Department of Commerce issued a preliminary ruling that solar products from Cambodia, Malaysia, Thailand, and Vietnam were being dumped in the US market at prices below production costs, leading to hefty tariffs. This has resulted in reduced operational rates for Southeast Asia’s PV manufacturing and has also affected India’s imports of components from China.

Moreover, the US has imposed high import tariffs on China and other countries like Cambodia, Vietnam, and Thailand, causing a decline in Chinese component exports to the US while increasing demand for Indian solar components. Reports suggest that nearly 80%-90% of Indian manufacturers producing DCR (Domestic Content Requirement) batteries prefer to prioritize exports, particularly to markets like the US where profit margins can reach up to 50%, double that of the domestic market.

Despite government encouragement to meet domestic demand, manufacturers opt for export, making it challenging for local project developers and suppliers to access the needed DCR components.

Understanding the Dilemma

The Indian government has been pushing for the development of a local PV industry, implementing the Production-Linked Incentive (PLI) scheme to reduce reliance on imported components. However, altering China’s dominant position in the PV supply chain in the short term is not an easy task. The Indian solar industry continues to face several challenges, including cost control, technological advancements, and supply chain optimization.

The push for local content requirements (DCR) is intended to nurture the domestic industry, but the reality seems to be counterproductive. Some commentators argue that as local manufacturers convert government subsidies into export competitiveness, India is essentially subsidizing US energy transitions at the expense of its own consumers.

To foster the growth of India’s clean technology manufacturing and solar industry, the Finance Minister proposed in 2025 to revise tariffs on solar cells and components, reducing the basic tariff on batteries from 25% to 20% and on components from 40% to 20%, although additional taxes will still apply.

This situation highlights that trade protection without technological independence will ultimately lead to an unsustainable industrial illusion.