Nitika Kumari
Policy Update
ABOUT:
Historically, India has been dependent on imports for solar parts, mainly from nations such as China. In fact, in the financial year 2023-24 alone, India’s solar equipment imports reached $7 billion, with China accounting for over 60% of this amount. This heavy reliance is expected to further strain the economy, as the annual solar import bill could soar to $30 billion by 2030 if domestic manufacturing is not ramped up. Creating domestic manufacturing allows one to reduce this dependence, protecting the sector against global supply chain challenges and encouraging self-reliance. The Production Linked Incentive (PLI) Scheme for National Programme on High-Efficiency Solar PV Modules is a game-changing policy move by the Government of India to build domestic manufacturing dominance for renewable energy infrastructure. The implementation of the scheme in two separate tranches totalling Rs. 24,000 crore reflects India’s resolve behind the Atmanirbhar Bharat program and its shift toward sustainable energy self-reliance. Besides promoting domestic manufacturing, the scheme also aims to spur the development of ancillary industries like EVA, solar glass, back-sheets, and junction boxes, feeding the overall solar manufacturing ecosystem. Furthermore, it is projected to reduce reliance on imports, leading to import substitution worth around ₹15,290 crore annually.
With this increasing domestic capability, India is poised to climb the high-technology solar manufacturing value chain and establish itself as a world leader in clean energy production. The scheme is also a major step towards realizing India’s goal of 500 GW of non-fossil fuel capacity by 2030. To accomplish this goal, it was felt that there was a need to set up manufacturing facilities at home.
FUNCTIONING:
Beneficiaries for the PLI Scheme were shortlisted through a transparent bidding process on a scoring system on three parameters. The first parameter was the level of integration in manufacturing. To be eligible, companies must commit to making a minimum of solar cells and modules. Integration in every step right from polysilicon to modules in three years received 50 marks. Manufacturing starting from wafers in two years received 35 marks, and starting from solar cells in 1.5 years received 20 marks.
Second, score was assigned to the proposed manufacturing capacity. Plants over 4,000 MW scored 50 marks, proportionally lesser marks for smaller capacities—20 marks for 1,000–1,499 MW.
Third, performance of the solar modules was evaluated. Modules were required to have a minimum efficiency performance: either 19.5% efficiency with a temperature coefficient ((The temperature coefficient quantifies how a material’s physical property (e.g., electrical resistance, solar panel efficiency) changes with temperature.)) of greater than -0.30%/°C, or 20% efficiency with a coefficient of -0.40%/°C or greater.
This scoring framework made sure that manufacturers with high integration, high capacity, and low module loss are selected. Incentives are provided for five years under the PLI scheme but from the commissioning date—actual or scheduled—whichever is earliest. Production delays shorten the incentive period.
The PLI scheme imposes stringent penalties to make sure that producers fulfill their obligations. If a chosen manufacturer does not deliver the promised integration, capacity, or module performance, PLI payments will be deferred until conformity is ensured. Yet, the five-year incentive span is locked from the planned commissioning date, thus delay shortens the aggregate eligible period. The manufacturers also have to furnish Performance Bank Guarantees (PBGs) on signing with IREDA; default in fulfilling commitments within time will result in forfeiture of the matching PBG portion. Also, if a manufacturer bids 25% or more lower PLI than indicated quoted for a year, disbursement will be limited to 95% of the eligible amount to encourage realistic bidding.
PERFORMANCE:
India is progressing remarkably towards becoming independent in producing solar cell and modules, but its scale of manufacturing still lags far behind China’s 588 GW a year module manufacturing and 880 GW utility-scale solar capacity. According to reports by analytics company Rubix, solar cell and module imports fell significantly—by 20% and 57% respectively—during the first eight months of the fiscal year 2024–25. Under the Tranche-II of the scheme, an aggregate manufacturing capacity of 39,600 MW has been allocated to 11 government-funded companies at the cost of mere ₹14,007 crore. Though that is in line with India’s 48 GW domestic production aim under the PLI scheme, progress has been variable in reality: just 7,400 MW were commissioned by October 2024 against the staggered target of 39,600 MW, although Mercom India states that gross module capacity stood at 90.9 GW by December 2024 – above initial PLI estimates because of private sector expansions. The administration also hopes to attract investments of ₹93,041 crore and create over 1,01,487 jobs, 35,010 of which will be direct and 66,477 indirect jobs.
Against BRICS counterparts, India’s 90.9 GW module capacity is now higher than Brazil’s 55 GW installed solar capacity, even as Brazil added 14.97 GW in 2024 alone. China is still the undisputed leader at 680 GW module shipments in 2024 and 277 GW new installations, while Russia continues to concentrate on thermal with only 6.18 GW renewable capacity. The planned manufacturing capacities would be commissioned in phases: 7,400 MW by October 2024, 16,800 MW by April 2025, and the remaining 15,400 MW by April 2026. Delays in the transfer of technology and supply constraints have, however, slowed down progress, with only 25.5 GW out of the 130.7 GW capacity awarded operational as of May 2025. Some of the companies that were awarded capacity under the scheme have already transitioned from the installation phase to production. FS India Solar Ventures Pvt. Ltd. has commenced manufacturing thin film solar PV modules at its facility in Mahindra World City, Jaipur, Rajasthan. Similarly, ReNew Photovoltaics Pvt. Ltd. has commenced manufacturing at its plant in Sriperumbudur, Kanchipuram district, Tamil Nadu. Grew Energy Pvt. Ltd. has begun operations in its Dudu unit near Jaipur, and TP Solar Ltd., a Tata Power subsidiary, has commenced production at its facility in Gangaikondan, Tirunelveli, Tamil Nadu.
India commissioned 25.3 gigawatts (GW) of solar module manufacturing capacity and 11.6 GW of solar cell capacity during calendar year 2024, according to Mercom India’s latest report State of Solar PV Manufacturing in India 2025. Together, India’s solar module manufacturing capacity stood at 90.9 GW as of December 2024 – a 284% rise from 2019 levels, yet still only 15% of China’s output. Gujarat, Tamil Nadu and Rajasthan were the leading three states for manufacturing modules, and Gujarat, Tamil Nadu and Karnataka were the front-runners in cell manufacturing capacity. In the past two years, Indian solar manufacturing companies have started to become significant players in the global solar panel export market. However, their total exports in the financial year 2022–2023 (FY23) were worth $1.03 billion, which is still very small compared to China’s exports, which amounted to about 238 gigawatts (GW) of solar modules, worth roughly $30 billion. India exports solar panels to several countries, including Brazil, Vietnam, the UAE, and some European nations, showing that Indian-made solar products are starting to find international demand — but still have a long way to go to match China’s dominance in the global solar industry. The Press Information Bureau (PIB) confirmed India’s export of solar panels worth $1.03 billion during the financial year 2022–23.
This development occurs against the backdrop of BRICS’ joint effort towards renewables, where the group commissioned 190 GW clean energy in 2024. India’s manufacturing focus stands in contrast to Brazil’s installation-driven growth and Russia’s thermal energy interests, placing New Delhi as the group’s up-and-coming solar production center besides China’s leadership. Despite outperforming initial PLI targets in cumulative capacity, the scheme’s phased commissioning timelines reveal gaps: only 19% of Tranche-II’s 39,600 MW target was operational by October 2024, necessitating potential deadline extensions. This underscores the need for policy agility to address supply chain dependencies and accelerate domestic value chain integration.
EMERGING ISSUES:
The Production Linked Incentive (PLI) Scheme for solar manufacturing in India, while ambitious in scope, has seen mixed fortunes because of a number of structural and policy issues. One of the main concerns has been the delay in disbursement of subsidies—up to December 2023, only 20.63% of the total ₹24,000 crore expenditure under Tranche-I (₹4,500 crore for 8,737 MW) and Tranche-II (₹19,500 crore for 39,600 MW) had been availed. These delays combined with excessively high eligibility requirements—e.g., having a minimum 1,000 MW manufacturing capability and multi-step vertical integration—have discouraged small participants and delayed implementation schedules. This has helped cause the program underachievement and impacted the economic viability of numerous projects, especially for Indian companies faced with an uncertain policy environment.
Adding to these domestic problems is India’s ongoing reliance on foreign raw materials, particularly China, which provides more than 80% of the Indian industry’s polysilicon, wafers, and solar cells. This dependency not only makes production expensive but also exposes industries to international supply chain volatility and price fluctuations. Also, The Indian solar industry is plagued by a critical shortage of skilled labor. Most companies are dependent on imported expertise for their installation, manufacturing, and operations. This scarcity of a skilled domestic talent pool slows down productivity and innovation.
Technological stagnation is also a competitiveness barrier. In contrast to the likes of China and Germany, Indian industry has not invested much in R&D, with consequent aging processes and diminished cost-effectiveness. Lack of low-cost domestic technology for processing key materials—quartz for polysilicon manufacturing, for instance—and insufficient R&D partnerships between industry and academia are further dampening innovation.
The global trading environment has introduced an extra dimension of complexity but also offers an opening for strategy to India. In April 2025, the U.S. slapped Chinese companies with high tariffs (up to 3,521%) on Southeast Asian solar imports redirected via Vietnam and Cambodia. In comparison, Indian modules presently enjoy a comparatively soft 26% tariff in the U.S.—well below the 36–49% that Southeast Asian rivals are put through. This difference provides Indian companies with a competitive advantage in the U.S. market, as long as they can manage their own input dependencies and cost structures well.
In order to seize this moment, India needs to take a comprehensive, visionary industrial strategy. For starters, PLI payments need to be streamlined and tied to sharp output milestones instead of fixed entry levels to ensure greater participation without loss of scale. Special focus needs to be on promoting vertically integrated units—from polysilicon to modules—to minimize import dependence and replicate China’s success through players such as LONGi and Trina Solar.
Second, India must negotiate bilateral free trade agreements with the U.S. to reduce tariffs for solar below 26%, aiming at parity with countries like Malaysia, which is endowed with a 24% tariff rate. Third, the R&D culture needs to be enhanced through public-private partnerships on the pattern of institutions such as Germany’s Fraunhofer Institute, promoting indigenous innovation and minimizing tech dependence.
Additionally, India must prioritize domestic production of critical raw materials through targeted import substitution policies. For example, quartz—essential for polysilicon—should be mined and processed locally, supported by tax incentives and infrastructure development. Simultaneously, national solar manufacturing clusters in Gujarat and Tamil Nadu should be developed into skill development hubs to address the 40% workforce shortfall currently facing the sector.
The U.S.-China trade tensions offer India a critical juncture. Strategically leveraged, India can break free from the role of a dependent assembler to become a crucial participant in the international solar value chain. Yet, in the absence of quick policy reforms, vertical integration, and targeted innovation, India will become a marginal supplier—exposed to both external disruptions and domestic inefficiencies. PLI scheme will thus provide a step-change from a subsidy-driven programme to a broad-based industrial policy bringing together trade, technology, and talent to create a robust and competitive solar manufacturing ecosystem.
WAY FORWARD:
For the development and self-sufficiency of India’s solar manufacturing industry, it is vital to have local infrastructure in place for upstream components like polysilicon, ingots, and wafers. This will allow for complete intra-country integration of the solar supply chain, lowering dependence on imports and the industry being more robust. Concurrently, a high emphasis on research and innovation will propel solar technology advancements to make solar solutions more efficient, cost-effective, and next-generation. Creating a solid R&D ecosystem will catapult India to the status of a global solar innovation hub. As the world quickly moves towards renewable energy, Indian companies are ready to become key global suppliers. By sustaining high quality standards, applying low-cost logistics, and providing competitive prices, they can definitely cut the Chinese exports’ supremacy considerably and develop a stronger global presence. Further, policy interventions requiring the employment of locally produced solar cells and modules in public and large-scale renewable energy installations can also enhance domestic demand, enhance self-sufficiency, and promote more private investment in production facilities.
REFERENCE
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About the Contributor:
NITIKA KUMARI is a postgraduate student of Defence and Strategic Studies at the Central University of Gujarat (2024–2026). She holds a Bachelor’s degree in Political Science and Economics from Ramjas College, University of Delhi. Her core academic interests include India’s national security, foreign policy, and international relations, with a focus on the intersection of strategic affairs, security dynamics, and regional stability in the Indian subcontinent.
Acknowledgement: The author sincerely thanks Ms. Aasthaba Jadeja and the IMPRI fellows for their valuable contributions.
Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.
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