India's Imports Of Solar Components Still High Even As Exports Jump

Generation of solar power in India has been growing at a five-year compounded annual growth rate of 13.9% till 2023, according to the Press Information Bureau. This growth coincides with policy shifts favoring solar capacity expansion since fiscal 2018.

Data from the Ministry of Commerce and Industry reveals a surprising trend in India's solar industry. While the domestic solar module manufacturing capacity has reached a level that can potentially meet internal needs, India still imports a significant number of solar modules and panels. Incidentally, this coincides with a rise in India's exports of solar components.

India imported Rs 28,726.8 crore worth of solar photovoltaic cells, assembled in the form of solar modules or solar panels, from April 2023 till January 2024. This value is 3.86 times higher than fiscal 2023.

Despite India's self-sufficiency, China has been the top exporter for solar modules or panels since domestic producers still prefer to import the panels due to price differences.

India's 25% import duty on Chinese solar cells and modules is aimed to boost domestic manufacturing. However, China appears to have found loopholes.

Chinese producers are shipping solar components to Southeast Asian countries like Cambodia, Malaysia, Thailand or Vietnam for minor processing in an attempt to avoid paying anti-dumping duties, according to the US Department of Commerce's findings last August.

This strategy's results are also reflected in the Ministry of Commerce's import data on solar panels. India's imports of solar panels from China indeed dropped 20% in the April–January period compared to 2021–2022. Vietnam's solar-panel exports to India have skyrocketed from Rs 2.15 lakh to a staggering Rs 6,713.2 crore in the same period. Imports from Malaysia and Singapore grew seven times and three times respectively. Cambodia, with no previous solar-panel exports to India, has now entered the market with Rs 167.2 crore worth of exports in the April–January period.

India's solar module or panel exports have grown at a three-year CAGR of 343% to Rs 12,104.2 crore in the April–January period in comparison to approximately Rs 618 crore in 2021–22.

The export potential for Indian manufacturers comes due to domestic companies' preference for importing cheaper Chinese components and countries like the US preferring Indian products compared to China's.

The Indian manufacturers are thriving, and this is largely driven by exports to the US, which has imposed restrictions on Chinese imports and accounts for 98% of India's exported solar modules or panels.

Prices of polysilicon, a key raw material for solar panels, have hit a three-year low due to overcapacity and fierce competition, according to a recent Bloomberg report. The China Silicon Industry Association has said that average prices have dropped 20% in the past week itself.

The same capacities that producers added when prices spiked in 2021 are now flooding the market, causing Chinese producers to see losses. Companies are now unwilling to sell as buyers are requesting extremely low prices, the association said. This leaves the domestic manufacturers an opportunity to sell more products locally as well.

The Indian producers could also see a domestic demand revival due to government push. Under some of the Ministry of New and Renewable Energy's current schemes, it has been mandated to source solar PV cells and modules from domestic sources. The Approved Models and Manufacturers of Solar Photovoltaic Modules (Requirements for Compulsory Registration) Order, 2019, is a list that states only the models and manufacturers included in the list are eligible for use in government projects.

Efforts made by various Indian companies can also help improve the value chain of the Indian solar component, which in turn will help lower prices. The Adani Group has begun commercial production of wafers and ingots, used for making solar power cells and modules, at its Gujarat factory. They also aim to make polysilicon in 2027/28. Companies like Reliance New Solar Energy Solar Ltd., a subsidiary of Reliance Industries Ltd., and Jindal India Solar Energy Ltd. have also announced plans to enter the polysilicon manufacturing space. This will not only help reduce India's import bill but also boost domestic manufacturing.

Waaree Energies, which is India's largest solar PV module manufacturer, has an aggregate capacity of 12 gigawatts. China's tensions with the US and the EU created a large opportunity for India.

In its draft red herring prospectus, Waaree Energies said that while India's manufacturing capacity of solar modules is expected to reach 90–95 GW by 2028, domestic demand is estimated to be around 40–45 GW. This indicates a surplus of solar module supply, which can be exported to other countries.

The high financial potential for solar module exports is also reflected in Waaree Energies' export sales. The company's export sales have grown 9.6 times from fiscal 2021 to fiscal 2023.