Domestic solar panel costs increases 50% in last 2 months

The prices of domestic solar panels have increased over 50% in the last two months to over Rs 30 per watt peak owing to the imposition of a 25% import duty on cells and higher commodity costs caused by the Ukraine crisis.

Domestic panel costs are on par with imported panels from China or even higher, pushing many developers to put their projects on hold as they have turned unviable given the rates created into the current power purchase agreements (PPAs).

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

China used to supply approximately 85% of the panel requirements of India for solar projects. The producers sourced raw materials such as polysilicon, cells, and ingots from them. However, the duties coupled with higher raw material costs have raised the input price for domestic manufacturers, making domestic panels expensive. The Chinese panels have become expensive for developers due to the 40% duty.

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

Doshi said the bigger crisis is the demand shortage. The developers have put their projects on halt, and there is very less demand in the market.

The PPAs signed for the projects become unviable at such high project costs. Now, Indian manufacturers have the good manufacturing capacity and the latest technology, but they need good local demand,” Doshi added.

Ashu Gupta, head of regulatory at CleanMax Enviro Energy Solutions, told the media that it is not correct if the cost of exports is cheaper than the domestic panel costs.

The current crisis of the high cost of panels appears to be a long drawn process unless India attains the 20 GW manufacturing capacity, Gupta said.

As of last month, India has an approved panel manufacturing capacity of 12GW per annum but to fulfil its capacity target of 450 GW by 2030, it needs 30 GW per annum capacity. The Indian government plans to sanction 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 fulfil its annual requirement by 2030.

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