Indian Solar Market Faces Module Oversupply Risk, Cell Gap Challenges: SBI Caps

A latest report from SBI Caps has shed light on some of the key issues confronting the Indian solar landscape. The report said that India’s solar manufacturing ecosystem has achieved maturity in modules, with capacity now sufficient to meet domestic requirements. However, it said that its shrinking export opportunities could create an oversupply situation in the medium term.

Aided by the government’s hand-holding support through schemes like the Production Linked Incentive (PLI) scheme, the Approved List of Models and Manufacturers (ALMM), and a favourable policy environment, the Indian solar module makers have scaled up capacities to nearly 100 GW over the past two years. This expansion has been absorbed by robust domestic demand, as solar installations in FY25 surged 60% year-on-year to ~24 GW, translating into a requirement of ~50 GWdc modules.

With annual additions expected to stabilise at 40–50 GW in the coming years, the installed base is likely to touch 190 GW by 2027. SBI Caops report said this could lead to a supply glut as export opportunities shrink, particularly after the US removed incentives for solar projects using imported modules. The world’s largest market is now pushing for onshore manufacturing, with clear advantages for early movers.

ALMM-II Push for Cell Manufacturing

While modules are self-sufficient, India’s solar cell capacity, at less than 30 GW, remains a weak link. The introduction of ALMM-II for cells, effective for bids submitted after August 31, 2025, is expected to accelerate investments. The order mandates use of enlisted cells for government-linked projects and also extends to the commercial and industrial (C&I) segment through net metering and open access.

The report said that this policy clarity is expected to take domestic cell capacity towards self-sufficiency in the medium term. In the interim, reliance on higher-cost DCR cells could push up project costs and dampen bidding enthusiasm. However, exemptions covering ~100 GW of projects bid out since December 2024 provide a buffer to prevent sharp price spikes.

Integration Challenges in Wafers and Polysilicon

Further upstream, India remains heavily dependent on China. The target to achieve 40 GW wafer capacity by March 2027 is ambitious, though on-ground progress is limited. The recent order clarifying that only “blue wafers” qualify for domestic classification provides some impetus, but polysilicon capacity remains absent.

The SBI Caps report said that China’s decision to shut nearly one-third of its polysilicon capacity highlights the risks of global supply volatility. With polysilicon prices spiking 35–40% in recent weeks, margins of non-integrated global players have been squeezed, as the cost pressure has not fully flowed down to module prices.

India’s PLI scheme, which incentivises full integration from polysilicon to modules, offers a structural advantage over many international peers who are integrated only from wafer to module.

Domestic Players Outperforming Global Counterparts

Indian solar manufacturers are currently delivering stronger margins and growth than their global peers, supported by policy incentives and buoyant domestic demand. Integrated manufacturers, in particular, are better placed to manage input costs and navigate tight cell supply conditions.

Standalone module makers may face margin variability, prompting many to diversify into adjacencies such as inverters, independent power production (IPPs), and battery storage.

While the sector is in what many call a “golden period,” analysts caution that over the longer term, dynamics could resemble those of the steel industry—marked by cyclical returns and high policy dependence.