Mandating DCR Modules Could Raise Solar Tariffs by 30–40 Paise/Unit: CareEdge

The government-issued Approved List of Models and Manufacturers for solar cells (ALMM-II) requires the use of Domestic Content Requirement (DCR) modules in utility-scale tenders as well as open access and net metering projects. With demand for DCR modules on the rise, the price gap between DCR and non-DCR modules has widened to around 5–6 cents.

This difference is expected to ripple through to tariffs. CareEdge Ratings estimates that plain vanilla solar tariffs could rise by 30–40 paise per unit from the current Rs 2.5/unit. The increase may be less pronounced for hybrid or storage-based projects, as solar accounts for a smaller share in their overall configuration. Still, the report underscores that DCR modules are likely to push conventional solar tariffs higher by Rs 0.30–0.40/unit.

Looking at growth prospects, CareEdge projects that nearly 10 GW of new capacity will come from rooftop solar, hybrid solar components, and off-grid systems. In addition, the agency expects 4–5 GW of open-access solar capacity to be added every year over the next three years, a trend supported by strong ESG commitments from corporates and improving project economics in the commercial and industrial (C&I) segment.

Impact Of Tariffs On Cell Manufacturing

As of July 2025, India’s module manufacturing capacity reached 118 GWp, while cell manufacturing capacity stood at 27 GWp. However, CareEdge found the effective operational capacity to be around 80–85 GWp for modules and 11–13 GWp for cells. Consequently, annual production is expected to be 50–60 GWp for modules and 8–10 GWp for cells, resulting in an import dependency of 40–45 GWp for cells.

Solar Can Push Annual RE Capacity Additions Beyond 40 GW

India installed ~29 GW of RE capacity in FY25, followed by ~21 GW during the first five months of FY26, spurred by the 25% reduction in the waiver of ISTS charges. CareEdge Ratings expects annual RE installations to exceed 40 GW over the next three years, driven by a healthy pipeline of more than 100 GW.

Nearly 10 GW will come from rooftop solar, hybrid solar components, and off-grid solar. Additionally, 4–5 GW of solar open-access capacities are likely to be added annually, supported by ESG commitments from corporates and the growing economic viability of C&I projects, it added. 

India’s Solar Equipment Manufacturing to Surpass 200 GWp by FY28

India’s module manufacturing capacity is expected to surpass 200 GWp by the end of FY28, nearly three to four times the average annual demand of 50–60 GWp over the next three years. This growth is supported by planned capacity additions of over 110 GWp from established and new players, entailing a capex of more than Rs 14,000 crore. Domestic cell manufacturing capacity is projected to reach 100 GWp during the same period, with capex exceeding Rs 55,000 crore, driven by backward integration efforts.

As a result, CareEdge Ratings expects module production to increasingly rely on exports, while cell production is also likely to eclipse domestic demand in the medium term. Pureplay module players could face consolidation, while integrated players are expected to withstand margin pressures owing to cost efficiencies.

Trump & China’s Effect on Indian Solar Manufacturing

India’s solar module exports have surged, with the US accounting for over 95% of exports in FY25, making American trade policies critical for the sector. However, export growth faces headwinds from Trump-era policy tightening, including the One Big Beautiful Bill Act (OBBBA). Indian module and cell exports declined by 40–45% in FY25 compared to FY24 due to UFLPA scrutiny on US imports.

Meanwhile, Chinese polysilicon majors have implemented two rounds of voluntary production cuts to push prices towards sustainable levels and proposed a government-aided buyout plan worth 50 billion yuan ($7 billion) to retire one-third of China’s ~3 million tonne polysilicon capacity. Indian manufacturers will need to strengthen backward integration to protect against input price volatility and supply chain risks.

CareEdge’s analysis highlights that the sector’s long-term trajectory remains supported by rising demand, policy incentives, and significant planned capacity expansions. With India set to cross 200 GWp of module manufacturing capacity by FY28, the focus will shift towards exports and deeper integration across the value chain. However, balancing affordability for consumers with supply chain resilience and domestic competitiveness will ultimately determine the sustainability of India’s solar growth story.