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Indian Solar Developers and EPC Companies face the Brunt of Equipment Inflation and COVID Impact

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The whole world has been greatly impacted by the COVID crisis last year which brought disturbance in the form of decreased demand and supply chain disruptions. However, the industry recovered quite quickly in India with the decrease in cases and the opening of the economy. But the second-order effects of the COVID crisis are hitting the industry quite hard now. The huge monetary and fiscal stimulus unleashed by the western economies particularly the USA has led to surging prices of all commodities which have reached decadal highs. Solar panel prices have increased by almost 30%-40% over the last year and the same is the case with other equipment parts as well. This is starting to impact the solar developers who are used to an environment of falling costs which has allowed them to earn higher margins even after bidding low as there is a gap between bidding and installation. But now this practice is hitting them negatively as prices have increased in the interim.

Solar India

Even solar EPC developers like Sterling and Wilson are also getting hit hard as their prices have increased since they bid for their contracts. Their prices are fixed while their costs have increased substantially leading to a sharp fall in margins which are anyway wafer-thin in this highly competitive industry. The 40% tariff announced from FY23 is also expected to lead to higher tariffs for the industry as both Chinese and Indian panel prices will increase substantially. The Indian solar manufacturers are unlikely to pass the gains in a supply-constrained industry to developers leading to better profits for them and higher tariffs for the customers. It would take time for the Indian manufacturers to build capacity so that there is sufficient competition. The Indian government has now changed its priority to promote manufacturers more and does not mind letting the customers pay a higher price with the benefit of cutting down imports from China which has become a major geopolitical rival to India with relations deteriorating over the last year. The industry fundamentals might switch to favor manufacturers more over the next 4-5 years as compared to the other industry stakeholders who might be negatively impacted.

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Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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