New Delhi: Credit rating agency ICRA said on Thursday India’s solar photovoltaic (PV) module manufacturing capacity is expected to rise to over 165 GW by March 2027 from about 109 GW currently, driven by strong policy support through the Approved List of Models and Manufacturers (ALMM), basic customs duty on imports, and the production-linked incentive (PLI) scheme.
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“The implementation of ALMM List-II for solar PV cells from June 2026 has spurred the ongoing expansion of cell manufacturing capacity by module original equipment manufacturers (OEMs) in India, which is likely to increase to about 100 GW by December 2027 from 17.9 GW currently under ALMM,” the statement said.
ICRA, however, warned that the industry faces a looming overcapacity scenario, as India’s annual solar installation is expected at 45–50 GW (direct current) compared with an annual module production capacity of 60–65 GW.
According to the statement, the recent imposition of US tariffs has hit export volumes, as modules redirected from overseas markets are now adding to domestic supply. This oversupply is expected to “result in a consolidation of the smaller/pureplay module players.” ICRA noted that vertically integrated manufacturers could emerge stronger “due to greater control over the supply chain.”
Ankit Jain, Vice President and Co-Group Head, Corporate Ratings, ICRA, said, “The operating profitability for ICRA’s sample set of domestic solar OEMs, which remained elevated at ~25 percent in FY2025, is likely to moderate due to competitive pressures and overcapacity build-up. The recent imposition of tariffs by USA and the growing regulatory uncertainty in the USA are likely to dampen export volumes, potentially exerting pricing pressures on domestic OEMs.”
He added, “Given that the ALMM requirement for solar cells is effective from June 2026, a significant scale-up in the cell manufacturing capacity along with its stabilisation in a timely manner remains critical in the near term. Further, the cost of modules using domestic cells is expected to be higher by 3-4 cents/watt compared to the cost of the domestic modules using imported cells.”
ICRA said that all projects where the last date of bid submission is before September 1, 2025, will be exempt from using solar PV cells under ALMM List-II even if commissioned after June 1, 2026. According to the statement, “This will support the order book of OEMs without cell manufacturing capacity in the near term.” However, it added that “the bidding activity has slowed down in the last few months, which remains a key monitorable.”
The agency highlighted that the solar PV manufacturing supply chain is dominated by China, accounting for over 90 percent of global capacity in polysilicon and wafer, more than 85 percent in cells, and around 80 percent in modules.
ICRA said, “Given the dependence on China for the sourcing of wafers and ingots, any potential geopolitical restrictions on the supply of technology/machinery in setting up backward integration facilities for domestic OEMs over the medium term remains a key monitorable.”
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It added that each stage of the solar value chain “demands higher technological complexity, which not only requires substantial capital investment but also heightens the risks associated with project stabilisation and implementation.”