India’s solar photovoltaic (PV) module manufacturing capacity is expected to increase to over 165 gigawatt (GW) by March 2027 from around 109 GW at present, according to Icra.
The growth will be led by strong policy support in the form of the approved list of models and manufacturers (ALMM), which effectively barred the direct import of modules, along with the imposition of basic customs duty on imported cells & modules, and the production-linked incentive (PLI) scheme.
The implementation of ALMM List-II for solar PV cells from June 2026 has spurred the ongoing expansion of cell manufacturing capacity by module original equipment manufacturers (OEMs) in India, which is likely to increase to about 100 GW by December 2027 from 17.9 GW currently under ALMM, Icra said.
However, expected overcapacity of modules in the domestic market due to imposition of US tariffs is likely to result in a consolidation of the smaller or pureplay module players.
Icra noted that industry is poised to face a potential overcapacity scenario as the annual solar capacity installation is expected at 45-50 gigawatt direct current (GWdc) against an annual solar module production of 60-65 GW.
Further, the recent imposition of US tariffs has adversely impacted the export volumes, posing new challenges for the industry as the modules have been redirected from the export market to the domestic market.
The vertically integrated manufacturers on the contrary, are likely to benefit over the long term due to greater control over the supply chain.
“The operating profitability of domestic solar OEMs, which remained elevated at ~25% in FY25, is likely to moderate due to competitive pressures and overcapacity build-up. The recent imposition of tariffs by the USA and the growing regulatory uncertainty in the USA are likely to dampen export volumes, potentially exerting pricing pressures on domestic OEMs,” said Ankit Jain, Vice President & Co-Group Head – Corporate Ratings, Icra.
He pointed out that given the ALMM requirement for solar cells is effective from June 2026, a significant scale-up in the cell manufacturing capacity along with its stabilisation in a timely manner remains critical in the near term.
Further, the cost of modules using domestic cells is expected to be higher by 3-4 cents/watt compared to the cost of the domestic modules using imported cells.
The bidding activity has slowed down in the last few months, which remains a key monitorable, as per Icra.
The solar PV manufacturing supply chain is dominated by China, with over 90% share in the global manufacturing capacity across polysilicon and wafer, over 85% share in cells and around 80% share in modules.
Given the dependence on China for the sourcing of wafers and ingots, any potential geopolitical restrictions on the supply of technology/machinery in setting up backward integration facilities for domestic OEMs over the medium term remains a key monitorable, Icra said. Moreover, each successive stage in the value chain demands higher technological complexity, which not only requires substantial capital investment but also heightens the risks associated with project stabilisation and implementation.