Local procurement mandate for solar power projects may get stringent

Proposal comes amid rising solar imports despite regulatory, tax curbs

The Centre is planning to tighten the mandate on domestic procurement in solar power project development to further push indigenous products. In a recent circular by the nodal Ministry of New and Renewable Energy (MNRE), it has been proposed to include solar cells (component of a solar module) in the ALMM (Approved List of Module Manufacturers) scheme, which till now was restricted to only solar modules (finished product). This comes at a time when solar imports have failed to slow down despite several regulatory and tax restrictions.

ALMM was floated in 2019 for a government-verified list of domestic suppliers of solar modules. Solar power projects covered under the ALMM must mandatorily procure solar modules from ALMM entities.

All the projects offered by the Centre or central agencies must abide by ALMM. Solar Energy Corporation of India (SECI), under the aegis of MNRE, which is the driver of solar project tendering in the country, mandates ALMM.

Now the Centre has floated the proposal to include solar cells in ALMM and have a separate list of domestic solar cell makers. This translates to all the domestic module-makers mandatorily procuring domestic solar cells from entities listed in ALMM. The draft amendment pegs 2026 as the commencement year for the same.

“All projects falling under the purview of ALMM shall have to mandatorily source their solar PV (photovoltaic) modules from models and manufacturers included in ALMM List-I for solar PV modules and such solar PV modules, in turn, shall have to use solar PV cells from amongst the models and manufacturers enlisted in ALMM List-II for solar PV cells,” it said.

Several module-makers in the country assemble the finished product here while importing the key component solar cell. MNRE in its proposal has highlighted that cells were not included in the ALMM earlier as there was no sufficient capacity in the country.

“With installed capacity of solar PV cells in the country expected to increase substantially in the next two years, it has been proposed to issue List-II of solar PV cells under ALMM, which shall be effective from 01.04.2026,” the notice said. The draft proposal is open for stakeholders’ comment.

The decision by MNRE to include solar cells in the ALMM stems from the growth expected in domestic cell manufacturing. The ministry is betting on the PLI scheme to push domestic manufacturing across the solar supply chain. According to internal presentations, the Centre expects solar cell manufacturing to grow 34 gigawatt (Gw) by FY25 and more than double by FY27. It currently stands at 9 Gw. The demand driver, according to government data, would be several schemes aimed at domestic procurement such as PM-Suryaghar and PM-Kusum. The expected solar equipment demand would be to the tune of 67 Gw by 2070, it said.

But the decision comes at a time when the imports of solar cells and modules have been rising steadily despite a manufacturing push by the Centre and tax barriers. The imports of solar cells and modules have cumulatively tripled during the last three years. The highest share of imports continues to be from China, despite India levying a basic customs duty (BCD) on imports from the neighbour.

While the BCD has impacted Chinese imports, whose share has come down to 62 per cent in 2023-24 as compared to 92 per cent in 2021-22, it is still the biggest importer, especially of solar cells. In the last three years, solar cell imports have grown by 63 per cent and that of modules by 29 per cent, according to data shared by MNRE in Parliament replies.

Several players, including state-owned NTPC, in the past have batted for deferment of ALMM as it caused delays and cost spikes for them. As the domestic capacity is far below the demand, most project developers face delay in project execution. According to sector executives, there is at least a 20-25 cents/unit difference between imported and domestic solar modules. In cells, it is even more, they said. NTPC’s lowest bid Rs 1.99 per unit solar power project was stuck due to ALMM, sources indicated, as no domestic player was able to match the low price.