India’s Solar PV Manufacturing Capacity Set to Cross 165 GW by 2027, Faces Overcapacity Risk: ICRA

India’s solar photovoltaic (PV) module manufacturing capacity is projected to surpass 165 gigawatts (GW) by March 2027, up from around 109 GW at present, according to the latest report by ICRA. The surge will be driven by strong policy support through measures such as the Approved List of Models and Manufacturers (ALMM), Basic Customs Duty (BCD) on imported cells and modules, and the Production-Linked Incentive (PLI) scheme.

ICRA highlighted that the implementation of ALMM List-II for solar PV cells from June 2026 has accelerated expansion plans among domestic module original equipment manufacturers (OEMs). India’s solar cell manufacturing capacity is expected to rise sharply to around 100 GW by December 2027, compared to 17.9 GW currently approved under ALMM.

However, the industry may soon face a potential overcapacity scenario, with annual solar installations projected at 45–50 GW (direct current) against an expected annual module production of 60–65 GW.

Adding to the challenge, recent U.S. tariffs on imported modules have hit export volumes, pushing more domestically produced modules into the local market. This oversupply is expected to trigger consolidation, particularly among smaller or standalone module manufacturers, while vertically integrated players are likely to benefit in the long run due to greater supply chain control.

“The operating profitability for ICRA’s sample set of domestic solar OEMs, which remained elevated at around 25% in FY2025, is likely to moderate due to competitive pressures and overcapacity build-up,” said Ankit Jain, Vice President & Co-Group Head – Corporate Ratings, ICRA.

“The recent U.S. tariffs and growing regulatory uncertainty are expected to dampen exports and create pricing pressure on domestic OEMs.”

ICRA emphasized that the timely scale-up and stabilisation of solar cell manufacturing remains critical, especially with ALMM requirements for cells becoming effective from June 2026. The report also noted that modules made using domestic cells will cost 3–4 cents per watt more compared to those using imported cells.

Meanwhile, all solar projects with bid submission deadlines before September 1, 2025, amounting to a pipeline of 45–50 GW, will be exempted from ALMM List-II cell requirements, even if commissioned after June 2026. This exemption is expected to support the order books of OEMs that currently lack cell manufacturing facilities.

However, ICRA observed a slowdown in solar tendering activity in recent months, calling it a key factor to monitor.

Globally, China continues to dominate the solar manufacturing supply chain, controlling over 90% of polysilicon and wafer capacity, 85% of solar cell capacity, and around 80% of module production. Given India’s dependence on Chinese wafers and ingots, ICRA cautioned that any geopolitical restrictions on technology or machinery supply could pose risks to domestic backward integration efforts.

Each stage of the solar value chain—from polysilicon to modules—demands higher technological sophistication and significant capital investment, increasing project implementation and stabilisation risks for India’s emerging solar manufacturing ecosystem, ICRA added.