The DCR Mandate and Quest for A Stronger Solar Sector

India’s quest for energy security has led it to seek manufacturing independence in solar, something that has needed to be balanced with the concurrent need to generate solar power at a low enough cost to be attractive for stakeholders. This journey for self sufficiency has taken the country through a full repertoire of measures over the past few years, from Safeguard Duty (2018), to Customs Duties (2022), to Anti-Dumping measures, the ALMM list (2022), and of course, in all this, a PLI schemes to support manufacturing. The final mandate has been the DCR mandate for cells, which mandates using modules with domestically produced cells as well, and has led to a lot of heartburn among developers and installers as it covers most projects from June 2026. SaurEnergy tries to find answers to the question of the year, namely, When will the DCR mandate cease to matter and be the burning issue it is for many right now. 

India’s Solar Manufacturing Quest, And Returns So far

India’s journey in the solar sector in the last two decades has been spectacular, if one goes by the bare numbers. Back in 2010, when the tariff for plain vanilla solar projects dropped to the region of Rs 10.95/kWh, it was seen as a milestone, with average tariffs at over Rs 12/kWh. However, PPAs signed in those years by early adopters like Karnataka have continued to haunt those states, as subsequent drops made these look expensive. 

Today, with average vanilla solar tariffs hovering around Rs 2.5/kWh and dropping storage costs, the sector has received a huge demand boost with solar+storage costs dropping to as low as Rs 4/kWh, and well below Rs 3 with viability gap funding. This has made Solar energy the most competitive energy source in India, comfortably surpassing the tariffs of coal-based thermal power plants. With energy storage, expect that position to be firmed up in the coming months, if the flood of BESS based tenders recently deliver. Credit needs to be given to Chinese manufacturers, whose efforts opened up a vast new market for solar and 2015-16 onwards, and since 2022, for storage. For India, which had upped its own targets in 2014, this dependence on imports, and that too from China, led to an obvious unease, with the government eventually finding a perfect alignment with its make in India or atmanirbhar bharat initiative in solar manufacturing. What has followed since then is a series of policy initiatives that supported, nurtured, and then backed Indian manufacturers to build a solar supply chain domestically. This impressive but unfinished journey has been the subject of passionate discussions. 

From a handful of small firms that were producing solar modules, today there has been a generational shift in firms and scale. Companies like Tata BP Solar, Indosolar, Moser Baer Solar, Websol Energy, and Jupiter Solar that were operating till 2020 at sub GW levels, have been joined by over 100 new firms. These new firms include the largest industrial houses like Reliance and the Adani Group, besides a slew of players, many manufacturing at GW scale, with a target of 5-10 GW of capacity the new normal now. From an enlisted capacity of 18 GW of module manufacturing in 2023, the number is closer to 108 GW in October. Complimenting these module makers are around 10 solar cell manufacturers. 

The Indian government’s various measures have obviously worked. Without these, consider how just one of the Chinese solar majors, Jinko Solar alone shipped around 41.84 GW of solar modules globally in the first half of 2025. If the trend continues, its total global supply in a year will be around 77% of India’s total enlisted annual solar module manufacturing nameplate capacity.

A recent report from SBI Caps said that the Indian solar module market is not just enough for the Indian demand, but is heading towards possible overcapacity. “The ~190 GW expected to be installed by 2027 could contribute to an oversupply, considering reduced scope for exports due to actions by the US in removing incentives for solar projects. Players who want to take advantage of the lucrative market would look to set up onshore facilities, with a distinct advantage for early movers as the US market is also building up indigenous upstream capacity.”

Companies like Premier Energies which is into the production of DCR cells claimed that the demand for DCR cells and DCR based modules have risen, linked to the PM Surya Ghar and PM-KUSUM market picking pace. 

“The DCR demand is obviously going up steadily, given the introduction of ALMM-2. Our estimate is that the current run rate of demand for DCR modules is about 15-gigawatts per annum. That is basically the Surya Ghar Yojana, the Kusum scheme, and the PSU scheme. But from early next year onwards we will see the open access demand coming through, because projects commissioned by June 2026, will also join the list,” Vinay Rustagi, Chief Business Officer of Premier Energies told investors recently.

He also added, “Early ‘26 onwards we expected the demand and rate to increase to about 25-gigawatts. And then, somewhere towards the end of the year by early 2027 the entire market, which is about 40-gigawatts to 45-gigawatts, will shift towards DCR. And our sales mix will basically largely reflect the changing mix of the market.”  

India’s biggest solar module and DCR cell maker Waaree Energies said that their order book comprised a small fraction for DCR orders. Till Q1, the top management told their investors that it was full for deliveries for the next 1-1.5 years which were long term orders, having the privilege of ‘grandfathered category, which will be exempted from DCR mandate. However, it is now working to boost its solar cell production, with another cell line to boost its DCR production capacity to cater to the rise in the demand for DCR cells and DCR based modules.  

The next phase of transition

Buoyed by the success in module and cell making, the government has already proposed ALMM for wafers too. All that is good for the manufacturing eco-system, but developers are chafing as higher costs cut their margins, and raise fears of customer push back. That is due to a simply outcome of demand -supply mismatch for DCR modules. 

As per the solar module makers, we spoke to, non-DCR Chinese solar cells were available in the market at the rate of 4 cent-5 cent while the price of DCR cells in India stands at around 14-15 cents, around three times, thus increasing the price of solar modules for several developers and vendors who want to supply modules for DCR mandated government projects. 

“The issue of price is not the only hazard for the DCR market. Several DCR cell makers, which have their own module manufacturing, fill their own captive needs first. Then they prefer large developers who can make the advance payments as well, leaving smaller developers and EPCs high and dry.

However, most solar module manufacturers believe this is a short term challenge. “DCR shortage is likely to impact the Indian solar landscape for some more time, but there is optimism on the horizon. By the next year, we can expect around 25 GW to 30 GW of solar cell capacity in India as several new solar lines are set to be commissioned in the next 1-2 years,” Abhinav Mahajan, Director of IB Solar told Saur Energy.

Mahajan adds that as the number of solar cell makers increases, leading to more price-based competition, the DCR cell price gap is likely to narrow.

On the other hand, solar project developers and EPC companies believe that with the DCR mandate and ALCM coming into the picture, the prices of modules are likely to go up in the next two years. 

Manish Mehta, Co-Founder & Chief Commercial Officer (CCO) of Sunsure Energy, said that while the ALCM would not affect the Commercial & Industrial (C&I) projects, it could raise the tariffs of utility-scale solar projects. 

“The introduction of ALCM is likely to raise the module prices due to the use of domestically sourced solar cells, which are a bit expensive than their Chinese counterparts. So every 1 rupee increase in the cost of the module for projects adds almost like seven, eight paise to the PPA price. This could increase the tariffs likely by Rs 50 paisa per kWh,” he said. 

Mehta’s views are concurrent with what rating agencies and think tanks project. As per a CareEdge Ratings forecast, with the prevalent price differential of 5-6 cents for modules complying with the Domestic Content Requirement (DCR) vis-a-vis non-DCR modules is likely to push plain vanilla solar tariffs by Rs 0.30-0.40 per unit from the prevailing levels of Rs 2.5 per unit.

 “Landed imported module prices continued their downward trajectory from 19 cents/Wp in July 2024 to 15 cents/Wp in July 2025 on account of persistent overcapacity in China. Likewise, a similar dip in cell prices has lowered the landed cost of domestic modules. Although imported modules remain cheaper than domestic modules by nearly 25% despite the applicable duties, non-tariff barriers and government-sponsored schemes continue to prop up demand for domestic modules. Domestic non-DCR module prices have seen a modest increase in FY26 owing to anti-dumping duties on input materials such as aluminium frames and solar glass,” the report says.

The introduction of ALCM becomes more significant as the government has mandated that the utility-scale tenders closed after August 31, 2025, or any other open access or net metering capacities commissioned on or after June 1, 2026 must compulsorily procure DCR modules, pushing the large-scale demand for DCR cells and modules, even at a higher cost. 

Why See DCR As An Impediment?

Shobit Rai, Managing Director (MD) of Prozeal Energy, said that while DCR could impact project developers and make them re–rethink about their margins, it is helping make the sector future-ready. The benefits of a more vertically indigenous system can outweigh the disadvantages in his view. 

“If the cost difference narrows to a reasonable level, say 10–15%, the advantages of domestic sourcing begin to outweigh pure price considerations. Factors like assured supply, lower logistics costs, currency stability, shorter lead times, and easier financing can tilt the equation in India’s favor. Over time, as technology maturity and economies of scale grow, Indian players can not only compete on cost but also differentiate on quality, reliability, and sustainability,” Rai told Saur Energy. 

He also added, “Yes, higher project costs have definitely slowed decision-making, particularly in the commercial and industrial (C&I) segment. Industrial buyers are extremely cost-sensitive, and even small increases in tariffs can make them rethink the timing of their investments.”

Why Gaps Exist In DCR & Chinese Cells

Industry leaders said that the large-scale government support and mass production in China allowed the prices of these products to go ultra-low. So much so that the biggest Chinese manufacturers have all registered losses, and are now involved in a concerted bid to raise prices.

“The significant cost difference between made-in-India solar cells and Chinese imports largely stems from the extensive support that the Chinese solar industry has received from its government. In China, companies investing in solar cell facilities have benefited from generous subsidies and financial incentives that reduce production costs, Government-backed infrastructure development that provides ready access to advanced manufacturing ecosystems, Low-cost financing, tax breaks, and land support, making large-scale manufacturing more viable. Consistent policy support and demand creation, ensuring economies of scale, Gautam Mohanka, Director of Gautam Solar, told Saur Energy. 

Mohanka opined that the divide between Indian and Chinese solar cells is likely to be reduced soon. 

“In China, the industry overcapacity led to aggressive price undercutting. On the other hand, India is witnessing a steady increase in domestic cell manufacturing capacity. As infrastructure strengthens and production volumes rise, the cost of Indian-made solar cells will gradually decline,” he added. 

Can BESS Reduce The Tariff Gap

One key positive sign of relief in the Indian renewable sector is the declining battery energy storage cost. This is likely to compensate for the higher DCR-based modules for solar projects with storage obligations. Thus, several developers anticipate that the reduction in battery costs could compensate for the anticipated rise of module cost in light of the ALCM and DCR mandates. 

“Yes, the decline in storage costs is a game-changer. For years, storage was seen as an expensive add-on that made renewable projects unviable in most cases. That equation has shifted. With the cost of lithium-ion batteries falling by nearly 80% over the past decade and new chemistries emerging, storage is now entering the mainstream,” Rai from Prozeal said.

He also added, “In practice, the decline in storage costs is offsetting the increase in solar module costs. Bundled renewable-plus-storage projects are becoming increasingly attractive because they offer both sustainability and energy security. For me, this is one of the most viable pathways to sustain growth despite cost headwinds. In fact, I believe the future lies in hybrid projects, solar plus wind plus storage, that can deliver round-the-clock green energy.”

What More Could Be Done

Abhinav Mahajan from IB Solar believes  that states can do much more. “We need a pro-solar manufacturing environment in most of the Indian states so that the sector expands across India uniformly. This includes working on providing land banks, capital incentives, assured buyers etc, to lure solar manufacturers to states that are still new to the industry.”

Gautam Solar’s Mohanka opined that more private-public partnerships can further propel the industry. The measures have been instrumental in reducing the reliance on imports and enhancing India’s efforts towards achieving a clean energy ecosystem. More public-private collaborations can enable better technology transfers while creating nurturing support ecosystems for startups, leading to building a robust foundation for innovation and future scaling while bridging investment gaps,” Mohanka added. 

Rai from Prozeal said that a long-term and uniform policy could help the industry to take long-term steps. “On the policy side, we need a transparent and stable roadmap that gives clarity on the trajectory of DCR, import duties, and incentives. Investors and developers should not be left guessing about rules that may change midway through a project cycle,” he said.

He also added, “On the supply side, speeding up the commissioning of domestic manufacturing plants is crucial. The faster PLI-linked facilities come online, the sooner the market will stabilise. On the financing side, transitional mechanisms like blended tariffs, viability gap funding, or concessional green finance can help buyers absorb higher costs in the short term.”

Samarth Wadhwa, CEO and Director of Ritika Systems Pvt. Ltd., called on the government to adopt a more adaptable policy for the off-grid solar market. He proposed that the use of non-DCR modules be allowed in this segment to avoid bottlenecks.

“While India’s DCR cell capacity is currently about 13 GW and expanding steadily, permitting non-DCR modules for off-grid installations could help maintain project timelines and provide relief to smaller EPC firms,” Wadhwa noted.

Akshat Jain, CEO of KLK Ventures, highlighted that states such as Uttar Pradesh, Bihar, and Haryana offer strong prospects for solar manufacturing, supported by rising demand and improved connectivity. However, he pointed out that smaller module manufacturers are finding it difficult to scale up due to the limited availability of DCR cells.

“For smaller players, sourcing DCR cells has become a major hurdle. Many units remain underutilised, and others are facing working capital pressures. Until adequate DCR cell production is achieved, the government should reconsider making their use mandatory for all projects,” Jain said.

He further noted that permitting non-DCR modules could help sustain a significant portion of the market, enabling smaller manufacturers to remain competitive and manage their liquidity challenges more effectively.

Conclusion

While DCR and ALMM mandates have temporarily raised costs, especially for smaller developers facing limited access to domestic cells, industry experts see them as growing pains toward a vertically integrated, self-reliant solar sector. Rising domestic cell capacity over the next few years is expected to ease supply constraints and moderate costs. Perhaps by the end of H1 Fy27 or earlier. Additionally, stable policies, public-private collaboration, and state-level support are crucial to sustain growth. Over time, the benefits of assured supply, shorter lead times, currency stability, and improved financing will outweigh initial price differentials. Recent measures like the GST cut on equipment will also help soften the blow from any upward pressure on prices for now. The government has also learned and offered staggered timelines to make the shift, be it for cells earlier, and wafers now, where mandates will kick in from 2028 possibly. With inverters in the cross hairs as well, the government’s role will remain crucial for the sector to allow for the kind of growth Indian needs at the right price for its consumers.