ICRA says India’s solar manufacturing sector faces oversupply risks as module capacity far exceeds domestic demand, pushing smaller manufacturers towards consolidation.
ICRA has warned that India’s solar manufacturing sector is likely to face an overcapacity scenario, with annual solar capacity expansion estimated at 45 GW to 50 GW (DC), against annual module manufacturing capacity of 60 GW to 65 GW. The rating agency said the imbalance is expected to drive consolidation among smaller or pure-play module manufacturers.
India’s solar panel manufacturing capacity is expected to cross 165 GW by March 2027, up from the current 109 GW. The growth is driven by policies such as the Approved Model and Manufacturer List (ALMM), basic customs duty on imported cells and modules, and the Production Related Incentive Program (PLI).
The upcoming implementation of ALMM List-II for solar PV cells from June 2026 has also accelerated the expansion of module OEMs (Original Equipment Manufacturers), with domestic cell manufacturing capacity expected to reach approximately 100 GW by December 2027, compared to 17.9 GW currently under ALMM.
ICRA said the recent imposition of US tariffs has negatively impacted India’s solar export volumes, forcing manufacturers to shift modules to the domestic market and increasing price pressure.
“Operating profitability for ICRA’s sample of domestic solar OEMs, which remained at a high level of 25% in fiscal 2025, is likely to moderate due to competitive pressures and build-up of excess capacity,” said Ankit Jain, vice president and co-group head for corporate ratings at ICRA. “The recent imposition of tariffs by the US and growing regulatory uncertainty in the US are likely to dampen export volumes, potentially putting pricing pressure on domestic OEMs.”
Jain said timely scale-up and stabilization of cell production will be critical once the ALMM requirement for solar cells comes into effect in June 2026. He estimated that modules made with domestic cells will cost three to four cents per watt more than modules made with imported cells.
All solar projects with bid submission deadlines before September 1, 2025 – meaning a 45 GW to 50 GW pipeline – will be exempt from the ALMM List-II requirement for domestic cells, even if they come into service after June 1, 2026.
“This will support the order book of OEMs without cell manufacturing capacity in the near term. Nevertheless, bidding activity has slowed in recent months, which remains an important monitorable factor,” ICRA said.
ICRA noted that China continues to dominate the global PV supply chain, accounting for more than 90% of polysilicon and wafer capacity, more than 85% of cell capacity and about 80% of module production. The agency said India’s dependence on Chinese suppliers for wafers and ingots exposes domestic OEMs to geopolitical and technology supply risks.
It added that each successive phase of backward integration requires higher technological sophistication and significant capital investments, increasing both implementation and stabilization risks for domestic manufacturers.
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