Boosting Solar Manufacturing in India

The Ministry of Finance and the Ministry of New and Renewable Energy (MNRE) in India are currently in discussions to introduce a new capital subsidy scheme aimed at enhancing solar photovoltaic (PV) manufacturing. This initiative, as shared by MNRE Secretary Santosh Kumar Sarangi, focuses on the upstream segment, specifically polysilicon refining and ingot and wafer production, which are crucial for solar technology.

While solar module and cell manufacturing in India have shown significant growth, upstream segments continue to struggle due to high capital intensity and competitive pricing pressures, especially from China. Sarangi highlighted the need for a strategic shift in how support is provided to these industries, suggesting that a capex subsidy could facilitate better growth opportunities.

Currently, the existing Production Linked Incentive (PLI) scheme covers both upstream and downstream segments of solar PV manufacturing. However, progress in upstream areas like polysilicon refining and ingot and wafer production has been slow. This has raised concerns about India's ability to meet domestic demand without relying heavily on imports.

One of the major hurdles for polysilicon production is its electricity intensity. Sarangi pointed out that sourcing low-cost electricity is essential for the industry to thrive. He emphasized that since establishing such industries involves significant capital expenditure, a dedicated subsidy would be beneficial. The MNRE is actively discussing this with the Ministry of Finance to explore the potential for a new scheme that supports polysilicon and ingot-wafer projects.

Currently, India’s solar PV cell manufacturing capacity stands at around 27 GW, while the installed capacity for ingot and wafer manufacturing is only about 2 GW. Alarmingly, there is no commercial polysilicon production in the country at present, which highlights the urgent need for government intervention to boost local production capabilities.

The MNRE has also indicated that, despite sufficient solar module manufacturing capacity to meet domestic needs, the country is still dependent on imports for upstream components. In FY25, imports of solar PV cells, wafers, and polysilicon were valued at approximately $1.64 billion, $156 million, and $30,000, respectively.

Launched in March 2021, the PLI scheme aimed to establish 65 GW of solar PV module manufacturing capacity per annum. However, operationalization gaps have been noted, particularly in upstream segments. A report by the Institute for Energy Economics and Financial Analysis (IEEFA) suggests that while downstream segments have made progress, upstream manufacturing remains significantly behind, signaling a critical area for improvement.