India's solar mfg boom turns into glut as capacity outpaces demand

By Rajesh Kumar Singh

 

India’s solar manufacturing industry is becoming a victim of its own success. 

A push to expand local production — encouraged by pandemic disruptions and strained relations with China — has resulted in a 13-fold jump in capacity since 2020, according to BloombergNEF, to nearly triple domestic demand. 

 

The scale of that surge prompted the government late last year to urge banks lending to the sector to exercise caution. Manufacturers, meanwhile, are beginning to pull back from lower-value output.

 

Capacity utilisation at the country’s module-assembly plants has shrunk to around 40 per cent from more than 70 per cent in the year through March 2023, a time before punitive US tariffs when exports to the world’s largest economy were booming, according to Avinash Hiranandani, managing director at module maker RenewSys India Pvt. Ltd.

 

“This is not a slowdown. It’s a structural glut,” Hiranandani said in an interview. 

 

India imported about 80 per cent of its solar modules until 2020. Then came a pandemic and supply chain upsets that revived a longstanding desire among policymakers to build out domestic capability. The country began levying taxes on imports of cells and modules and introduced a list of homegrown manufacturers approved for the local market, effectively a barrier for Chinese suppliers.

 

The impact was swift. Domestic module capacity expanded rapidly as investors bet on the country’s energy transition as well as booming demand in the US. 

 

India continues to depend on China for upstream components such as cells and wafers, but new mandates are likely to transform even that segment. From June, all modules sold in the country will need to use locally made cells and the renewable energy ministry has said it plans to introduce similar obligations for wafers starting June 2028.

 

Cell-manufacturing capacity is expected to increase to 100 gigawatts over the next two years, credit rating firm Icra Ltd. estimates, a four-times jump from now. That’s another glut in the making, according to Sameer Gupta, chairman of module maker Jakson Ltd, Capacity coming online after the middle of 2027 may struggle to find a market, he added.

 

“Today, cell prices are strong due to a shortage of locally made cells, but prices will come crashing down as soon as there’s overcapacity,” said Hiranandani of Mumbai-based RenewSys. “Many would find it difficult to recover their money. It will break the back of mid-sized companies.”

 

The problem is that India’s demand hasn’t kept pace. Granted, domestic consumption is increasing — the nation installed a record 38 gigawatts of solar power in 2025, according to official data, about 53 gigawatts in DC terms. That would still be dwarfed by manufacturing capacity of about 154 gigawatts at the end of the year.

 

Exports, meanwhile, have been hit by tariffs introduced by US President Donald Trump last year. While a trade deal has lowered those levies, uncertainty continues to loom over the market — along with anti-dumping investigations. The Alliance for American Solar Manufacturing and Trade, a group of US solar manufacturers, has sought duties of almost 214 per cent to curb supplies from India.

 

One solution is to find alternative markets overseas, according to Rishabh Jain, a fellow at the Council on Energy Environment and Water — including by following China’s lead and leveraging the Export-Import Bank of India to finance solar power projects in regions like Africa, with a mandate that it uses Indian-made modules.

 

“It is time to start thinking more globally,” Jain said.

 

In the near term, industry executives say, not everyone will survive the glut — particularly as technology evolves and less-advanced companies struggle to keep up investments. 

 

Nearly 30 gigawatts of India’s module capacity uses MonoPERC cells that are fast becoming obsolete with the advent of more efficient technologies, according to Prashant Mathur, chief executive officer at module maker Saatvik Green Energy Ltd. That will mean regular and costly technology upgrades.

 

“Eventually, it’s going to be a big boys’ club,” said Mathur. “There’s no doubt about that.”