Since the beginning of the Russia-Ukraine crisis, prices for solar panels have increased by 8% to 9%. The introduction of an increased Basic Custom Duty on imports of solar panels was the icing on the cake.

The cost of solar panels has increased even further as a result of the introduction of a baseline customs tariff of 40% on imports of solar modules and 25% on imports of solar cells on April 1.

A cost analysis will reveal that the price of a solar cell is approximately half of the price of a solar module. This indicates that the total cost of the solar module will rise independently if the price of solar cells rises.

Due to a 15% increase in the price of solar cells, which make up roughly half of the cost of solar panels, the price of solar panels has increased by 15% since the conflict began.

According to official MNRE news, India has a 3GW annual manufacturing capacity for solar cells. However, India cannot manufacture ingots, wafers, or polysilicon.

India is heavily dependent on imported solar cells because of several factors, including the country’s lack of cell production capabilities and reliance on imported raw materials like polysilicon and wafers.

Many developers are delaying projects that have become unprofitable due to the rates locked in current power purchase agreements because domestic panel prices are on par with or even higher than Chinese imports.

The government imposed a tariff of 25% on solar cells and a tariff of 40% on solar panels on April 1, 2022, to assist domestic solar manufacturers in expanding their production capacity. During this time, the solar industry is likely to be affected by a double whammy of rising commodity prices and import tariffs imposed on developers and manufacturers.

Due to India’s lack of manufacturing capacity, up to 85 percent of the country’s solar needs were fulfilled by China. They gave the makers ingots, cells, and raw materials like polysilicon. However, the input costs of domestic manufacturers have increased as a result of the levies and rising prices for raw materials, making local panels more expensive. Chinese panels have become extremely pricey for solar developers or EPC players as a result of the 40% tariff.

Manufacturers of solar panels in India have been forced to raise panel prices as a result of the dramatic rise in input costs. 12.5% of the panel’s cost is covered by the 25% cell tariff. This price rise is also caused by an increase in commodity prices, as well as an increase in shipping costs and supply timelines.

A lack of demand, which is having a significant impact on marketing, is one thing the industry lacks. There is little demand for the product on the market as developers have halted their projects. These high-rate PPAs are putting off solar developers.

Indian companies have modern technology and sufficient manufacturing capacity, but they need strong domestic demand.

Solar developers or EPC players may request a reduction in GST on projects as a remedy if the import duty on panels cannot be reduced. The impact of the Supported Rundown of Models and Makers (ALMM) strategy, alongside the higher labor and products charge (GST) and deficient nearby assembling capacity are the essential explanations behind the board cost insecurity.

It would appear that these policies were put into effect earlier than expected. The Indian government appears to be in such a hurry that they are not taking into account how this will affect their solar targets. Policies need to be reviewed right away, and production capacity needs to be built, to solve the issue.

With approximately 90% of the market for solar cells and modules imported into China, China leads Hong Kong and Malaysia. The company’s stakeholders have expressed concerns that the sector may be forced to rely on imports if domestic manufacturing is unable to meet growing demand. The cost of purchasing solar modules will rise as a result, raising the overall cost of solar projects.

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