0
By clicking the button, I accept the Terms of Use of the service and its Privacy Policy, as well as consent to the processing of personal data.
Don’t have an account? Signup
Powered by :
Ratinsg and research firm CRISIL predicts that indigenous solar cells are expected to account for just around half of the overall demand this fiscal, up from a fourth last fiscal. This strong uptick will be driven by the government’s push to reduce dependence on imports, supported by a strong ramp-up in solar cell manufacturing capacity. However, such large capacity additions are likely to put pressure on capacity utilisation and realisations, that can stretch payback periods.
ALCM Mandate And Change
After the implementation of the Approved List of Models and Manufacturers (ALMM) from April 1, 2024, the Ministry of New and Renewable Energy (MNRE) mandated upstreaming to production of solar cells through the Approved List of Cell Manufacturers (ALCM), thereby ensuring ‘Made in India’ components and reducing dependence on imported cells in the solar photovoltaic supply chain. This solar manufacturing push has had wide repurcussions that are still playing out, with the increasingly obvious situation of dricving consolidation in the sector as well capitalised firms grab the advantage.
Applicable from June 2026, the ALCM is mandatory for utility-scale projects with bid submission date after August 31, 2025, and for net metering1 and open access projects commissioned after June 1, 2026. Residential rooftop solar consumers participating in the PM Surya Ghar: Muft Bijli Yojana ‘Give It Up’ are exempt up to March 31, 2027.
Says Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings, “The ALCM will sharply reset India’s solar cell supply mix. Domestic supply will gain share and meet around half of the 60-65 GW demand this fiscal, with imports making up for the rest. The shift will be led by demand for indigenous cells from newer utility-scale bids, net-metering and open-access projects, and government-backed schemes such as Kisan Urja Suraksha Evam Utthaan Mahabhiyan, or KUSUM. Meanwhile, imports will mainly be for the pipeline of unexecuted utility-scale projects with bid submissions prior to the August 31, 2025 cut-off. As the earlier project pipeline winds down,
import dependence should fall materially starting next fiscal.”
With rising demand and anticipated reduction in imports, several manufacturers are undertaking capital expenditure to set up or expand solar cell manufacturing capacities. Net-net, such capacity is expected to nearly double to ~60 GW by the end of this fiscal, with further additions likely over the next fiscal. This could challenge the returns on new solar cell manufacturing capacities.
Says Ankit Hakhu, Director, Crisil Ratings, “The surge in solar cell capacity will redraw project economics. Capacities commissioned by the end of this fiscal could see payback periods stretch by 1-2 years, compared with the 4-5 years it took the early movers integrating backward to solar cell manufacturing. These early movers benefited from higher premiums and 50-60% capacity utilisation after stabilisation – advantages that are likely to narrow as fresh capacity comes on stream.”
The payback periods are crucial given the rapid evolution of technology in the sector, which can shorten the economic life of assets, particularly where reliance on imported raw materials adds to margin volatility.
That said, manufacturers pursuing deeper backward integration into ingot and wafer manufacturing – currently almos entirely imported – are likely to see better returns through higher realisations following the government’s notification on the likely applicability of ALMM III2 from June 2028 onwards.
Risk Of Slowing Demand
A key monitorable is the risk of weaker solar module demand arising from delays in power purchase agreement signings. Moreover, the MNRE has also set up an expert committee to assess ALCM exemption requests for net-metering and open-access projects with installed but uncommissioned modules, or where developers have taken substantive steps toward project implementation.
We are India’s leading B2B media house, reporting full-time on solar energy, wind, battery storage, solar inverters, and electric vehicle (EV)
Quick Links
© 2025 Saur Energy. All Rights Reserved.
