India’s new domestic-content mandate for solar cells is set to sharply reduce reliance on imports, with indigenous manufacturers expected to meet around half of the country’s 60-65 GW solar cell demand this fiscal, compared with just one-fourth last fiscal. However, the rapid capacity build-up triggered by the policy could pressure utilisation levels and extend payback periods for new investments, according to Crisil Ratings.
The assessment comes as the government’s Approved List of Cell Manufacturers (ALCM) framework becomes effective from June 2026, requiring the use of domestically approved solar cells in utility-scale, net-metering and open-access projects. The move is aimed at reducing dependence on imported solar cells and strengthening domestic manufacturing.
“The ALCM will sharply reset India’s solar cell supply mix. Domestic supply will gain share and meet around half of the 60-65 GW demand this fiscal, with imports making up for the rest,” said Manish Gupta, Deputy Chief Ratings Officer, Crisil Ratings. “The shift will be led by demand for indigenous cells from newer utility-scale bids, net-metering and open-access projects, and government-backed schemes such as KUSUM.”
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According to Crisil, imports will continue primarily for the pipeline of utility-scale projects whose bids were submitted before the August 31, 2025 cut-off. As these projects get executed, dependence on imported cells is expected to decline materially from next fiscal.
The policy shift has triggered a wave of fresh investments across the solar manufacturing value chain.
Several manufacturers are expanding existing facilities or setting up new capacities, resulting in domestic solar cell manufacturing capacity being projected to nearly double to around 60 GW by the end of this fiscal, with further additions likely next year.
Policy Squeeze
But Crisil cautioned that capacity creation may outpace near-term demand growth, creating pressure on returns.
“The surge in solar cell capacity will redraw project economics. Capacities commissioned by the end of this fiscal could see payback periods stretch by 1-2 years, compared with the 4-5 years it took the early movers integrating backward to solar cell manufacturing,” said Ankit Hakhu, Director, Crisil Ratings.
Hakhu said early entrants benefited from higher premiums and 50-60% capacity utilisation after stabilisation, advantages that are likely to narrow as fresh capacity comes on stream.
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The ratings agency said the longer payback periods assume significance because solar manufacturing technology is evolving rapidly, potentially shortening the economic life of assets. Manufacturers also continue to face margin volatility due to dependence on imported raw materials.
Looking Upstream
Crisil said companies that move further upstream into ingot and wafer manufacturing—segments that remain largely import-dependent — could benefit if the proposed ALMM III framework is implemented from June 2028.
The agency also flagged delays in power purchase agreement signings as a key risk for solar module demand. In addition, any exemptions granted by the MNRE for certain net-metering and open-access projects could affect demand for indigenous solar cells and remain an important monitorable for the sector.
TOPICSManufacturingThis article was first uploaded on June eighteen, twenty twenty-six, at two minutes past seven in the evening. © The Indian Express (P) Ltd