India’s Solar PLI Scheme Delivers Strong Manufacturing Growth but Faces Major Operational and Policy Hurdles: JMK Research–IEEFA Report

India’s Production-Linked Incentive (PLI) scheme for solar PV manufacturing has accelerated the country’s transition toward a domestic photovoltaic ecosystem, but critical structural and policy challenges continue to limit its full impact, according to a new joint report by JMK Research and the Institute for Energy Economics and Financial Analysis (IEEFA).

The report highlights that the scheme has played a pivotal role in laying the foundation for long-term solar manufacturing capacity. “The scheme channels government support towards measurable industrial output, helping build durable, long-term manufacturing capacity,” said Vibhuti Garg, Director, IEEFA South Asia and contributing author.

Significant Expansion Since 2022, Driven by PLI

India’s PV manufacturing capacity has grown substantially since 2022. As of June 2025, India has 120 GW of operational module capacity and 29.3 GW of cell capacity. Capacity additions post-2022 account for 82 GW in modules and 22.7 GW in cells, reflecting a dramatic 216% and 344% increase, respectively.

The report notes that whatever limited domestic polysilicon and wafer capacities exist in India have emerged solely due to the PLI scheme, highlighting continued upstream dependence on imports. Approximately 36% of total cell capacity and 24% of module capacity originate from PLI allocations.

Implementation and Policy Barriers Slow Progress

Despite its contribution, the scheme continues to encounter major operational hurdles. These include the high capital intensity required for upstream integration, insufficient incentive coverage, inconsistent trade policies, and vulnerability to global price volatility.

“The PLI scheme for solar PV manufacturing faces implementation challenges like high capital intensity of upstream integration, inadequate incentives, inconsistencies in trade policy, import dependency, and global raw material price volatility,” said Prabhakar Sharma, senior consultant at JMK Research and co-author.

Policy asymmetries have further compounded challenges. While polysilicon and wafer imports remain unrestricted, module manufacturers are bound by ALMM rules. Frequent revisions to ALMM requirements have created uncertainty for domestic producers.

Dependence on Imported Equipment and Technical Expertise

India’s reliance on imported machinery, specialized components, and Chinese technical know-how has slowed the ramp-up of new capacity. “This situation has been worsened by visa restrictions and limited equipment availability,” noted Chirag H Tewani, senior research associate at JMK Research.

Global commodity price fluctuations—particularly in polysilicon and wafers—combined with China’s dominance in upstream production, expose Indian manufacturers to supply-chain disruptions. The country’s limited domestic polysilicon capacity continues to affect cost competitiveness.

Slow Commissioning and Lower Economic Impact

Delays in commissioning PLI-backed facilities have curtailed expected economic gains. As of June 2025, only 31 GW of the 65 GW targeted module capacity has been commissioned, attracting ₹48,120 crore (US$5.5 billion) in investments and generating 38,500 direct jobs—well below the scheme’s targets of ₹94,000 crore (US$10.45 billion) and 1.95 lakh jobs.

The report warns of potential financial losses due to PLI non-compliance. PLI awardees across both tranches face an estimated ₹41,834 crore (~US$4.8 billion) cumulative monetary risk arising from penalties, lost incentives, and unrealised revenues.

Need for Recalibrated Policy Direction

The report states that the future of India’s solar manufacturing ecosystem hinges on policy recalibration, not merely extending timelines. “Future PLI iterations should focus on improving cost competitiveness, upstream integration and market resilience,” said Aman Gupta, research associate, JMK Research.

Key recommendations include:

• Tax credits and affordable financing
• Risk buffers against global price volatility
• Multi-layered incentives across the value chain
• Longer policy horizons to attract integrated manufacturing
• Support for critical upstream components

Global Trade Pressures Add Complexity

The report also flags the impact of the emerging 50% U.S. tariff on Indian solar exports, which could pressure domestic manufacturers and intensify the need for coordinated policy responses.

It concludes that India must establish stronger institutional mechanisms for synchronized policy implementation, align incentives with realistic manufacturing timelines, and provide long-term regulatory certainty to build a resilient and globally competitive solar manufacturing ecosystem.