Author: PPD Team Date: 07/02/2025
India’s solar cell manufacturing capacity is set to expand from 10 GW in fiscal 2024 to 50 GW–55 GW by fiscal 2027, driven by government policies aimed at reducing photovoltaic (PV) cell and module imports, according to a report by Crisil Ratings. The expansion will require Rs 280 billion–Rs 300 billion ($3.2 billion–$3.6 billion) in capital expenditure, primarily funded through a 70:30 debt-equity mix.
Crisil Ratings analyzed four domestic manufacturers representing 54% of India’s total cell capacity as of March 2024 and noted that strong balance sheets and cash accruals will support credit quality. The “Make in India” initiative and policy measures are expected to drive backward integration strategies among module manufacturers, boosting domestic cell production.
India’s module manufacturing capacity surged from 7 GW in March 2020 to 60 GW by March 2024, reducing module imports to 25% of total consumption from 45% in fiscal 2024. However, cell imports remain high at 80%, with China as the primary supplier. As renewable capacity expands, limited domestic cell production could increase reliance on imports. Crisil expects India to add 60 GW–65 GW of solar capacity over the next two fiscal years.
The implementation of the Approved List of Models and Manufacturers (ALMM) from June 1, along with the production-linked incentive (PLI) scheme and domestic content requirements, has led to capacity expansion announcements of 45 GW–50 GW. This is expected to raise India’s total solar cell manufacturing capacity to around 55 GW by fiscal 2027. The use of domestic cells could capture 70%–80% of module costs within India, up from 40%–50% without them, with domestic module capacity backed by local cell production rising to over 50% from less than 15% in fiscal 2024.
Despite significant capital expenditure, the average annual capex intensity will remain stable at 1.3 to 1.5 times over three years until fiscal 2027, compared to 1.2 times over the past three fiscals, said Ankush Tyagi, associate director at Crisil Ratings. This will be supported by an expanding earnings base, increased module capacity, and robust operating margins backed by ALMM implementation. A strong demand outlook is expected to keep the capex payback period at a healthy four to five years.
Only modules and cells listed under ALMM List I and II qualify for government and government-assisted projects, open access projects, and net-metering projects selling power to the government, with only domestic manufacturers currently registered under ALMM. However, domestically produced cells are expected to cost 80%–90% more than imports due to higher wafer-to-cell conversion costs, limited economies of scale, and Chinese dumping. While the PLI and other government schemes may help offset some costs, solar project developers could still face higher project expenses. Sustained policy support through non-tariff measures such as ALMM and the Approved List of Capital Manufacturers (ALCM) will be essential to drive demand for locally manufactured cells and modules.