Timely commissioning of the solar cell manufacturing projects announced so far will be crucial to ensure there is adequate capacity to meet demand in years to come. For while the announcements suggest supply will be adequate, the typical utilisation factor arithmetic and other imponderables could spell a transient shortfall till manufacturing ramps up.
Earlier this year, the government extended the Approved List of Models and Manufacturers (ALMM) to solar cells from June 1, 2026, in a bid to accelerate solar cell manufacturing in India.
Domestic solar cell production capacity is estimated to increase fourfold to 43-47 GW by June 2026 from 10 GW in March 2024. As against this, annual demand is expected to average 40-45 GW between fiscals 2027 and 2030.
So, production needs to catch up and fast.
As things stand, of the 79 corporate entities that together own the country’s 62 GW installed solar power capacity as of December 2024, only 13 have an integrated cell manufacturing base. The rest will have to decide between expanding capacity or competing for domestic cell supplies.
Further, the high prices of domestically manufactured cells could impact tariff levels bid at solar power project auctions. Today, Indian solar cells are 1.5-2.0x costlier than alternatives from China, even after basic customs duty. Based on current market dynamics, such high prices can drive up the capital cost of solar power projects by Rs 5-10 million/MW and require tariff increase of Rs 0.40-0.50 per unit as offset.
The industry has seen announcements of over 55 GW through the Production Linked Incentive scheme and beyond. This augurs well because data shows cell-to-module integrated plants enjoy 2-6 percentage points better Ebitda margins versus an only-module unit historically.
Although 12 non-integrated players have announced plans to install ~32 GW capacity by 2029, the relatively higher capital cost of cell manufacturing plants compared with module assembly lines and falling prices of the solar value chain could slow things down.
Figure: Majority of ALMM-enlisted module players need to consider integration
Source: MNRE, CRISIL-Bridge To India Research
The ALMM cell mandate could also pose challenges for companies that don’t develop domestic cell manufacturing capability as they would not be complying and, thus, could face module-supply challenges that can impact their market share over the long term.
Overall, the non-tariff barrier will protect domestic manufacturers that are vulnerable to global supply shocks and even aid exports as the United States, a key market, continues to manufacture modules at 30-35% higher prices owing to lack of upstream components.
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