Since its launch, India’s flagship solar photovoltaic manufacturing incentive scheme has driven “strong growth” in the sector, yet building a complete domestic supply chain still faces many obstacles.
A new report by the energy transition think tank—the Institute for Energy Economics and Financial Analysis (IEEFA)—states that since 2022, India’s Production-Linked Incentive (PLI) scheme has significantly spurred the expansion of domestic solar manufacturing capacity.
As of June, the country’s operational module capacity reached 120 GW, and operational cell capacity reached 29.3 GW. Since 2022, module capacity has increased by 82 GW, and cell capacity has increased by 22.7 GW. Over the past three years, these figures have grown by 216% and 344%, respectively.
Vibhuti Garg, Director of South Asia at IEEFA, stated, “The scheme channels government support towards measurable industrial output, helping to build durable, long-term manufacturing capacity.”
However, the report notes that upstream manufacturing capacity lags far behind module and cell capacity. India’s operational polysilicon production capacity is 3.3 GW, and wafer capacity is 5.3 GW, both driven by the PLI scheme.
The PLI scheme is named as such because it rewards companies for producing solar products and modules in India rather than providing upfront capital subsidies.
Despite some success in the upstream sector, Prabhakar Sharma, Senior Consultant at JMK Research and one of the authors of the report, stated, “The PLI scheme for solar PV manufacturing faces implementation challenges, such as high capital intensity for upstream integration, insufficient incentives, inconsistent trade policies, import dependence, and global raw material price volatility.”
India’s import restrictions on wafers and polysilicon differ from those on solar cells and modules. IEEFA noted that, combined with restrictions on modules under the Approved List of Models and Manufacturers (ALMM) scheme and “frequent ALMM revisions,” this creates uncertainty for domestic manufacturers.
On the other hand, few countries outside China have successfully built upstream solar supply chains. The construction of polysilicon and wafer facilities is more costly, complex, and slower, both in the United States and India.
IEEFA’s report stated that the polysilicon industry, in particular, has been highly volatile in recent years. Major Chinese producers have long faced oversupply and low prices, prompting the Chinese government to push for industry restructuring in recent months. This has exposed Indian manufacturers to price surges and uncertainty.
Chirag H Tewani, Senior Research Associate at JMK Research and a co-author of the report, noted, “India’s reliance on imported machinery, components, and Chinese technical expertise further slows capacity ramp-up, exacerbated by visa restrictions and limited equipment supply.”
Furthermore, the report points out that delays in establishing PLI-compliant manufacturing plants mean India has failed to meet its industry targets.
Sharma added, “Delays in the implementation of PLI solar PV plants have also limited the scheme’s economic impact.” The report noted that as of June 2025, out of a targeted 65 GW of module capacity, only 31 GW was operational, attracting approximately ₹481.2 billion (around $5.5 billion) in investments and creating 38,500 direct jobs—far below the targets of ₹940 billion ($10.45 billion) and 195,000 direct jobs.
IEEFA recommends that future PLI schemes should include “a comprehensive manufacturing-linked framework integrating fiscal support, upfront capital subsidies, co-development, and longer policy timelines.”
Aman Gupta, Research Associate at JMK Research and one of the authors of the report, emphasized, “Future PLI schemes should focus on improving cost competitiveness, strengthening upstream integration, and enhancing market resilience.” The report calls for comprehensive measures, including “tax credits, low-cost financing, and risk buffers against global price volatility; tiered incentives and longer policy timelines to encourage full value chain participation; and support for critical components to foster an integrated domestic supply chain.”
