Five years ago, most solar modules sold in India were assembled with imported Chinese cells. Chinese module makers alone accounted for 72% of India’s installations in FY22. Today, India’s cell capacity stands at 35 gigawatts, the second-largest in the world. Getting there is not cheap. As per a Jefferies report, setting up 1 gigawatt of integrated capacity from ingot to cell costs roughly $140 million.
That cost is now shaping who survives in the industry, favouring companies with strong balance sheets and existing cell capacity over smaller players who cannot fund the climb up the manufacturing chain.
This shift did not happen on its own. It follows a sequence of three government mandates rolled out between 2024 and 2028, each one pushing the industry a step further up the manufacturing chain. According to the Jefferies report, this phased approach is expected to localise close to 90% of India’s solar manufacturing value chain by 2030.
India’s solar manufacturing moves up the value chain
The first of these tools is the Approved List of Models and Manufacturers, or ALMM. This came into effect in April 2024. Under this rule, only solar modules made by listed domestic manufacturers can be used in government projects, government-assisted projects and net-metering schemes. As per the report, this step alone cut out 95% of India’s installation market from module imports.
The scheme was tightened further in June 2026 with the Domestic Content Requirement, or DCR. This mandates the use of domestically manufactured solar cells for module makers to remain on the ALMM list. Until this point, many Indian companies were assembling modules using imported Chinese cells and now, the DCR rule closed that gap.
A third layer is set to arrive in June 2028. This is the Approved List of Wafer Manufacturers, or ALWM. It will require domestic ingots and wafers to be used in every module that wants ALMM eligibility. According to the report, this final mandate is meant to ensure that the entire chain, from ingot to finished module, is built within India.
Why India is phasing its solar manufacturing mandates
Earlier attempts to support local manufacturing, including a National Program on High-Efficiency Solar PV Modules launched in 2021 with an outlay of Rs 24,000 crore, saw limited success. As per the report, this was largely because Chinese overcapacity had made cell imports far cheaper than local production, and Indian companies focused only on the least capital-intensive part of the chain, which was module assembly.
An anti-dumping duty of 40% on modules and 25% on cells was also imposed in April 2022 on all imports, regardless of country of origin. This led to a sharp fall in Chinese module imports in FY23. But imports rose again sharply in FY24, ahead of the government mandating domestic modules for its own projects.
The lesson from these early rounds appears to have shaped the current strategy. Rather than a single blanket rule, the government has staggered its mandates. Modules first, then cells, then wafers and ingots. Each stage forces backward integration further up the chain, according to the report.
India becomes the world’s second-largest solar PV manufacturer
India has already become the world’s second-largest solar PV manufacturer. According to the Jefferies’ report, the country’s module capacity stands at 156 gigawatts, second only to China’s 1,500 gigawatts, and more than twice the size of the third-largest producer.
On solar cells, India’s capacity has reached 35 gigawatts, again the second-largest globally. Another 100 gigawatts of cell capacity is under construction. This is expected to take India’s annual cell capacity to about 130 gigawatts by the end of calendar year 2027.
The report further noted that, wafer and ingot capacity remains at an earlier stage. About 60 gigawatts of ingot and wafer capacity is under various stages of construction, with commissioning expected in calendar year 2028, in line with the ALWM deadline.
Why solar cell manufacturing is attracting more capital
Backward integration is not cheap. As per the report, setting up 1 gigawatt of integrated capacity from ingot to cell costs roughly $140 million. This capital intensity is expected to favour companies with strong, low-debt balance sheets and existing cell capacity, since fewer players will have the financial muscle to build all the way up the chain.
This scarcity is already showing up in pricing. Cell capacity is concentrated among a handful of players and current production lags demand, which the report says has resulted in strong margins for cell makers. Module margins, by contrast, have narrowed to single digits as that part of the business has become more commoditised and competitive.
According to the report, the cell market will remain in shortage through FY27, with demand and supply reaching balance only by the second half of FY28. Wafer capacity is expected to hit around 80 gigawatts direct current no earlier than the end of FY30. This means shortages in wafers and ingots could persist for a few more years, benefiting companies that enter this segment early.
Why solar and battery storage are gaining on thermal power
The push to localise supply comes alongside strong demand growth for solar power itself. Solar paired with battery storage has become cheaper than thermal power in recent tenders. According to the report, solar plus battery storage tariffs including charging costs work out to Rs 4.5 to 5 per unit, compared with Rs 5.8 to 6.3 per unit for marginal thermal power over the past two years.
Another advantage is that solar plus storage tariffs are fixed for 20 years, while thermal tariffs rise annually. The report projects India’s annual solar installations will grow from about 60 gigawatts direct current in FY26 to 74 gigawatts direct current by FY30.
Why polysilicon remains outside India’s localisation push
Not everything is being localised. Polysilicon, the most capital-intensive part of the solar supply chain, has no government mandate for ALMM eligibility in the near term, as per the report. Since polysilicon accounts for only about 10% of the value in a finished solar module, its exclusion does not significantly dent the localisation target. As per the report, India’s ingot-to-module ecosystem will still capture around 90% of the total solar manufacturing value chain by 2030, even without a mandate on polysilicon.