Recently, the Indian Ministry of New and Renewable Energy (MNRE) issued a policy directive, urging financial institutions to adopt a cautious approach toward financing new standalone solar module production capacity. Simultaneously, the focus of financial support will shift toward upstream segments such as silicon ingots, silicon wafers, polysilicon, and key auxiliary components. This move aims to address the structural imbalance in the domestic photovoltaic industry chain, characterized by “excess downstream capacity and gaps upstream.”
An official memorandum clarifies that lending institutions should prioritize supporting “fully integrated solar manufacturing facilities” rather than simple module assembly lines. The MNRE emphasized that this measure is intended to extend the industry chain upstream and build a balanced and resilient manufacturing ecosystem. Financial resources should be primarily directed toward areas with a “significant gap between production capacity and demand.” Among these, solar glass (with an annual production capacity of 15 GW) and aluminum frames (with an annual production capacity of 17 GW) were specifically highlighted, as their current shortages are affecting the stability of the domestic supply chain.
This policy adjustment stems from an urgent warning by the All India Solar Industries Association (AISIA). The association previously wrote to the MNRE, pointing out that India’s module production capacity has approached four times the annual domestic demand. As of November, the module capacity included in the “Approved List of Models and Manufacturers” (ALMM) reached 122 GW, while the cell production capacity during the same period was only 18.48 GW. AISIA warned that “disorderly financing” of module capacity not only leads to idle assets but may also trigger banking credit risks.
MNRE data indicates that current module production capacity exceeds demand by 200%–250% and may surpass 200 GW in the future. In contrast, upstream silicon ingot and wafer capacity stands at only 2 GW, and there is a lack of commercial-scale polysilicon production. This imbalance has left Indian photovoltaic manufacturers highly dependent on imported raw materials. Although module imports decreased from $3.36 billion in the 2021–22 fiscal year to $2.15 billion in the 2024–25 fiscal year, the localization rate in core segments remains below 10%.
To strengthen upstream domestic production capacity, the MNRE has proposed mandating the use of domestic silicon wafers and ingots under the ALMM system starting from June 2028. This policy aligns with India’s $1 billion upstream subsidy program. Companies like Reliance Industries have already embarked on full industry chain development, with their Gujarat plant achieving vertical integration from polysilicon to modules, with an initial capacity of 10 GW.
Market analysis suggests that while the policy may curb the blind expansion of module capacity, cultivating the upstream sector requires long-term investment. According to Mercom India data, India currently has a pipeline of 191.9 GW of large-scale photovoltaic projects, with 162.5 GW already auctioned. Strong demand provides support for industry chain upgrades. However, the cost of domestically produced cells in India remains 50% higher than that of imported Chinese products. Balancing policy support with market efficiency will be key to India’s photovoltaic localization efforts.
