Why in the News?

• The United States has imposed preliminary countervailing duties of 126% on solar imports from India following a subsidy investigation.

What’s in Today’s Article?

• Duties on Solar Panels (Background, India’s Expanding Capacity, Impact on Manufacturers, Industry Response, Implications, etc.)

Background to the US Decision

• The U.S. Commerce Department has announced preliminary countervailing duties (CVD) of 126% on crystalline silicon photovoltaic cells and modules imported from India.
• The move follows an investigation into alleged unfair subsidies that enabled Indian manufacturers to sell solar products at lower prices in the U.S. market.
• The investigation also covers Indonesia and Laos, with varying duty rates. These measures are separate from broader global tariffs previously announced by the U.S. administration. The final determination is expected later this year.
• This development comes at a time when India’s solar manufacturing capacity has expanded significantly.

India’s Expanding Solar Manufacturing Capacity

• India’s solar module manufacturing capacity has grown rapidly and now exceeds 140 gigawatts (GW) per annum.
• It is expected to rise further to over 165 GW by March 2027.
• However, domestic demand has not kept pace. Annual solar capacity installations in India are projected at around 45-50 gigawatts direct current (GWDC).
• This creates a structural supply-demand imbalance. The industry has relied partly on exports to absorb surplus capacity.
• Between 2021 and 2024, over 90% of India’s solar photovoltaic module exports were shipped to the U.S.
• Solar exports to the U.S. were valued at $792.6 million in 2024, marking a sharp increase compared to 2022.
• Given this heavy dependence, the U.S. decision has significant implications.

Potential Impact on Indian Manufacturers

• Export Disruption
  • Industry analysts warn that the high duty rate could make the U.S. market largely inaccessible for Indian solar manufacturers.
• Pricing Pressure in the Domestic Market
  • If export volumes are redirected to India, the already oversupplied domestic market may face intensified pricing pressure.
  • With manufacturing capacity far exceeding annual installations, additional supply could reduce module prices and compress profit margins for domestic original equipment manufacturers (OEMs).
• Project and Financing Implications
  • Industry experts note that tariffs can alter project-level assumptions, affecting:
    • Financing structures
    • Power purchase agreement (PPA) timelines
    • Electricity tariffs
  • Solar project implementation in India is already facing challenges such as slower project award activity, delays in PPA signing, and transmission connectivity constraints.
  • Any further disruption may impact renewable energy deployment targets.

Divergent Industry Responses

• While many experts see the duties as disruptive, some major Indian manufacturers claim limited exposure to the U.S. market.
• Certain firms have reportedly reduced exports to negligible levels in anticipation of U.S. policy tightening.
• Exports to the U.S. are estimated to have declined sharply in 2025 and currently account for only a small share of total production for some players.
• This suggests that the impact may vary across companies depending on their export exposure and business strategies.

Broader Trade and Strategic Context

• The U.S. investigation stems from allegations that Chinese manufacturers, facing high U.S. tariffs, shifted production to countries such as India, Indonesia, and Laos to retain market access.
• India, Indonesia, and Laos together accounted for 57% of U.S. solar module imports in the first half of 2025.
• The duties aim to protect U.S. domestic solar manufacturing and restore “fair competition,” according to U.S. industry groups.
• At the same time, higher import costs may increase solar project costs within the U.S., potentially slowing clean energy deployment there.

Implications for India’s Energy Transition

• India has set ambitious renewable energy targets, including 500 GW of non-fossil fuel capacity by 2030. A robust domestic manufacturing ecosystem is central to achieving these goals.
• The U.S. duties may compel India to:

• Diversify export markets
• Strengthen domestic demand through policy incentives
• Encourage overseas manufacturing investments

• Experts suggest that India may need to shift from exporting products to exporting capital by establishing manufacturing units abroad to retain access to key markets.