Shrey Madaan, Indian Policy Associate, Consumer Choice Center
India’s latest solar sourcing rules are being presented as a manufacturing policy. In practice, they are also a competition policy. From June 1, solar projects under net-metering and open-access schemes must use domestically manufactured solar cells sourced from approved producers.
The policy reflects India’s push to build a stronger domestic solar supply chain and reduce dependence on imports, particularly from China. The ambition to expand domestic solar manufacturing is valid. But building local capacity and preserving competition should not be competing objectives. The challenge is adopting policies that achieve both.
India’s solar manufacturing journey remains incomplete. The country has developed substantial module manufacturing capacity, but solar cell production continues to lag behind demand. Many modules assembled in India still rely on imported cells. Policymakers want to close that gap by encouraging investment in domestic cell production and reducing dependence on foreign suppliers.
The challenge is that demand currently exceeds domestic supply. India’s annual solar cell demand is estimated at roughly 50 GW, while domestic production capacity remains closer to 25-30 GW. In advanced technologies such as TOPCon cells, the gap is even larger. Tightening sourcing requirements before sufficient capacity exists risks creating supply constraints across the sector.
That matters because supply shortages rarely stay confined to manufacturers. They eventually reach consumers. Industry estimates suggest rooftop solar systems could become more expensive under the new framework. For many households, solar will remain an attractive investment, particularly where subsidies are available. But higher upfront costs still affect adoption. Every additional barrier makes it harder for consumers to participate in India’s clean energy transition.
The consequences extend beyond price. They also affect competition. Many of India’s solar module manufacturers do not produce their own cells. Instead, they assemble modules using cells purchased from suppliers. Under the new rules, those firms must compete for a limited pool of domestically manufactured cells, much of which is controlled by companies that manufacture both cells and modules.
That creates a market imbalance. Big scale manufacturers with greater control over their supply chains are naturally in a better position to navigate shortages. As supplies dwindle, smaller competitors face limited options, making it harder for them to adjust and compete on equal terms. If these trends persist, larger companies could strengthen their position while smaller competitors find it highly difficult to compete. The concern is not market success itself. Strong competition rewards companies that innovate, invest and earn consumer trust. It becomes challenging to sustain those benefits when access to resources , rather than competitive performance, starts shaping who gains market share.
The reasons to support domestic manufacturing are valid. Recent geopolitical tensions have underscored the risks of relying too heavily on vulnerable supply chains, particularly in strategic sectors such as advanced manufacturing and energy. Building local capacity is a sensible move. The real challenge is crafting policies to support the domestic industry without compromising competition and consumer choice.
Supporting domestic manufacturing does not have to come at the expense of competition. The United States and the European Union have backed clean-energy industries through tax incentives, subsidies, and public investment while continuing to expand market capacity and attract private capital. The objective has been to make domestic firms more competitive. Stronger domestic industries and competitive markets have been treated as complementary goals rather than competing ones
That distinction matters. Industrial policy works best when it expands opportunities instead of narrowing them. A stronger domestic manufacturing base is a worthwhile goal, but it should not come at the expense of competition.
The bigger challenge is not whether India should build domestic manufacturing capacity. But it is ensuring that capacity, competition, and consumer interests develop together. India’s solar ambitions will ultimately depend on more than domestic production targets. They will depend on creating a market where firms compete to innovate, reduce costs, and attract customers. A stronger domestic industry is an important goal, but competition remains one of the most effective tools for achieving it.
