Domestic solar panel prices jump 50% in 2 months to Rs 30/wattpeak

The prices of domestic solar panels have jumped over 50% in the last two months to over Rs 30 per wattpeak owing to imposition of 25% import duty on cells and higher commodity prices caused by the Ukraine crisis. Domestic panel prices are on par with imported panels from China or even higher, forcing many developers to put their projects on hold as they have turned unviable given the rates built into the existing power purchase agreements.

The government on April 1, 2022 imposed 40% import duty on solar panels, and 25% on solar cells to help domestic manufacturers expand their capacities. However, in the interim, the sector is seen suffering from the double whammy of higher commodity prices and the imposition of import duties for both developers as well as manufacturers.

China used to supply around 85% of India’s panel requirements for solar projects. The manufacturers sourced raw materials such as cells, polysilicones, ingots from them. However, the duties coupled with higher raw material prices have increased the input cost for domestic manufacturers, making domestic panels costly. The Chinese panels have become costly for developers due to 40% duty.

Hitesh Doshi, chairman of Waaree Energies, India’s second-largest panel manufacturer told FE, “We were forced to hike the panel prices as all the input costs increased drastically. The 25% duty on cells translates to 12.5% of the panel price. Also, higher commodity and shipping cost prices added to the price hike.”

However, Doshi noted the bigger crisis is lack of demand. The developers have put their projects on hold and there is a very little demand in the market. “The PPAs signed for the projects become unviable at such high project costs. Indian manufacturers have now good manufacturing capacity and latest technology but they need good local demand,” Doshi added.

Ashu Gupta, head of regulatory at CleanMax Enviro Energy Solutions, said, it is not correct if the price of exports is cheaper compared to domestic panel prices. “It is high time the industry is regulated to promote manufacturing in the country. The price needs to be regulated to ensure the end consumers are not affected. The current crisis of high price of panels seems to be a long drawn process unless India achieves the 20 GW manufacturing capacity,” Gupta said.

India has an approved panel manufacturing capacity of 12GW per annum as of last month, but to meet its capacity target of 450 GW by 2030, it requires 30 GW per annum capacity. If industry sources are to be believed, the Indian government plans to approve around 8 GW of panel manufacturing applications by the first week of May 2022. If we consider this scenario, India would still fall short by 10 GW to meet its yearly requirement till 2030.

There is a belief that Indian government will be in for a rude shock if the policies are not adjusted timely. “The developers need some solution in terms of reduction of GST on projects that are as high as 13.9% or increase in depreciation if the import duty on panes cannot be reduced,” said Puneet Goyal, co-founder of SunAlpha Energy.

Gautam Das, co-founder of Oorjan Cleantech said, the uncertainty over impact of approved list of models and manufacturers (ALMM) policy, increased goods and services tax (GST) and low domestic manufacturing capacity have added to the volatility in panel price. Introduction of few of these policies seem to be ahead of time. An urgent revisit to the policies and building manufacturing capacity are essential to ease out the situation.

“Enhancing focus on offering production linked incentive should be explored to promote Make in India rather than imposing higher import duties on panels as the domestic capacity is too small at this stage. Renewable energy is the need of the hour and the pace of solar adoption should not be a casualty,” Das said.