India’s solar photovoltaic (PV) module manufacturing capacity has reached approximately 233 GW as of June 2026, making the country the world’s second-largest module manufacturer. However, manufacturing facilities are operating at only 35-40% capacity utilisation, significantly below the 50-65% range generally considered necessary for sustainable operations, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research.
The report, titled “Assessing overcapacity risk in India’s solar PV manufacturing market”, finds that the rapid expansion of India’s solar manufacturing industry has been concentrated predominantly at the module stage, while upstream segments including cells, wafers and polysilicon remain comparatively underdeveloped.
Module manufacturing capacity is now nearly seven times India’s cell manufacturing capacity and 116 times its ingot-wafer capacity. This imbalance has left the domestic solar manufacturing chain heavily dependent on imported inputs, predominantly from China.
Capacity imbalance
The supply-demand gap is unlikely to narrow by the end of the decade, the report said. Around 135 GW of additional module manufacturing capacity is already planned or under construction, with firm investment commitments and near-certain commissioning schedules.
Although solar deployment in India is expected to expand across utility-scale, commercial and industrial, rooftop and hybrid segments, the report said the pace of demand growth is unlikely to be sufficient to absorb the capacity already committed.
New demand from data centres, green hydrogen and ammonia projects, and exports could provide additional support. These segments are estimated to create incremental demand of 17-22 GW by 2030, with green hydrogen identified as the largest potential source because of the dedicated renewable capacity required for such projects.
Even this additional demand, however, is unlikely to fully absorb the scale of module manufacturing expansion already planned.
Export exposure
Exports are expected to remain important for improving utilisation of India’s growing manufacturing base, but the country’s current export concentration presents a significant risk. The US accounted for approximately 97% of India’s module export volume in FY2026.
That export channel has subsequently been disrupted by combined US duties exceeding 200% on most Indian manufacturers. As a result, Indian module exports to the US have fallen by 44-47% from their FY2024 peak.
The European Union has emerged as the most structured medium-term alternative, particularly as its recent supply-chain and sourcing rules increasingly favour diversification. However, the report cautioned that access to overseas markets alone will not be sufficient to sustain export growth.
Indian manufacturers will need to narrow the cost and technology gap with China through greater scale, integration and operational efficiency to establish a stronger position in international markets.
Upstream constraints
The report identifies policy sequencing and entry barriers as two key reasons for the structural imbalance in India’s solar manufacturing value chain.
Module assembly is comparatively easier to enter because it requires modest capital investment, shorter commissioning timelines and lower process complexity. Cell and wafer manufacturing, in contrast, require higher capital expenditure, longer development periods and specialised expertise.
The report also links the imbalance to the sequencing of the Approved List of Models and Manufacturers (ALMM). List I requirements for modules created a demand pull at the module manufacturing stage for nearly five years before requirements relating to cells and wafers followed.
“India has added module capacity faster than the market can absorb it. With factories running at 35-40%, the pressure on utilisation, margins, and returns will only intensify. Standalone module manufacturers face a real risk of stranded assets,” said Prabhakar Sharma, Senior Consultant at JMK Research and lead author of the report.
China cost gap
The narrowing price differential between Indian and Chinese modules is creating an opportunity for domestic manufacturers. The report said the price gap has narrowed by roughly 28.6% from its 2024 level.
Indian modules nevertheless remain more expensive than Chinese products. The report therefore identified cost and technology competitiveness as key factors that will determine whether Indian manufacturers can translate the narrowing price gap into higher export volumes.
Financial conditions have also created more opportunities for Indian manufacturers. Leading Chinese producers continue to absorb losses arising from persistent oversupply, with the top five reporting combined net losses exceeding USD 4-4.7 billion, approximately Rs 37,800-44,415 crore, in 2025.
Indian manufacturers, by contrast, remained profitable through 2025 and Q1 2026, supported by domestic policy protection and higher export margins.
Policy measures
The report recommends restructuring the production-linked incentive (PLI) framework at the component level, with meaningful rewards for polysilicon-wafer-cell-module (PWCM) manufacturing provided independently. This would lower the entry barrier for companies seeking to specialise in individual stages of the solar manufacturing value chain.
It also recommends distributing incentives more evenly across cells, wafers and polysilicon rather than concentrating support on modules, alongside stronger industry-research collaboration and targeted, time-bound export support.
The report further calls for India to use its membership of the Pax Silica coalition to diversify silicon inputs and reduce dependence on China. It recommends accelerating power transmission and right-of-way clearances to support domestic solar deployment and establishing a framework for repowering ageing solar assets.
“Incentives need to promote upstream specialisation and give exporters targeted, time-bound support,” said Chirag H. Tewani, Senior Research Associate at JMK Research and co-author of the report. “India’s entry into the Pax Silica coalition is a real opportunity to diversify silicon inputs and cut its reliance on China.”
ALMM exemption
The availability of domestic cells compliant with ALMM List II has emerged as a key constraint for module manufacturers that do not have in-house cell production, according to the report.
The subsequent exemption for net-metering and open-access renewable energy projects until the end of 2026 provides additional time for domestic cell manufacturing capacity to scale up. It also helps mitigate immediate utilisation pressure on standalone module manufacturers.
The report concludes that the current module overcapacity should be viewed as a transitional feature of a rapidly expanding industry. Demand absorption, consolidation and disciplined upstream investment could help address the imbalance over the coming decade.
The central challenge for India’s solar manufacturing sector, according to the report, has therefore shifted from building capacity to ensuring that existing capacity is effectively utilised while simultaneously deepening the domestic value chain.
The featured photograph is for representation only.
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