What Is Hurting the PLI Scheme for Solar Manufacturing? Report Explains

The Indian government launched a dedicated Production Linked Incentive (PLI) scheme in two tranches to boost the domestic solar manufacturing industry with strong backward integration. The objective was to ensure self-sufficiency across the solar value chain—from polysilicon and ingots to wafers, cells, and modules. However, the initiative has faced several bottlenecks that have limited its expected impact.

A latest report from IEEFA and JMK Research states that although government support through the PLI scheme has indeed pushed the industry toward deeper backward integration, multiple policy-related and structural issues have hampered or slowed progress.

The report notes that as of June 2025, India’s installed polysilicon capacity stood at 3.3 GW, while wafer capacity was 5.3 GW. It highlights that whatever limited polysilicon and wafer capacities exist in India today have come solely through the PLI scheme, while around 36 percent of total cell capacity and 24 percent of module capacity can be attributed to PLI allocations.

The government launched Tranche-I of the solar PLI scheme in December 2021 for fully integrated manufacturing facilities (polysilicon to module). Tranche-II (April 2023) targeted distributed capacities ranging from polysilicon to module, wafer to module, and cell to module across various companies. Total allocations under the scheme amounted to Rs 24,000 crore.

Challenges in Execution

According to the IEEFA report, several issues have slowed the scheme’s progress and limited its outcomes. The key bottlenecks include:

1. Unrestricted Imports and ALMM Flip-Flops

The report highlights that frequent changes in ALMM rules disrupted planning for PLI beneficiaries. Policy inconsistency discouraged long-term investments, especially in polysilicon and wafer manufacturing. The deferral of ALMM in 2023 coincided with Tranche-II, enabling unrestricted imports during a period of global oversupply and slowing tangible PLI progress.

“Although reinstated on 1 April 2024, imported cells remained exempt, and cell prices fell sharply from about US$0.12/Wp (March 2023) to US$0.03/Wp (FY2024–25), undermining the investment viability of integrated cell + module facilities under PLI. The industry remains cautious about future policy changes, particularly regarding the Approved List of Cell Manufacturers (ALMM List-II) coming into force in June 202622 and the recently drafted ALMM (List-III) for wafer manufacturing that will come into effect in June 2028. 23,” the report said.

2. High Capital Demand

While module manufacturing is relatively less capital-intensive, upstream technologies—cells, wafers, ingots, and polysilicon—require significantly higher investment.

For example, the report notes that a 1 GW module plant requires Rs 170 crore, a cell plant needs Rs 650 crore, and a wafer–ingot facility requires Rs 700 crore.

“The high capital intensity of upstream segments has slowed progress towards the scheme’s integrated manufacturing goals, as manufacturers face steep upfront investment requirements, resulting in extended and uncertain payback periods,” the report said.

3. Supply Chain Ecosystem Deficiencies and Import Woes

The report points out that import dependence poses challenges for manufacturers working to meet progressively stringent localisation targets.

‘"This import dependency creates challenges for manufacturers attempting to meet progressive and stringent localisation targets, escalating from 68% in year one to approximately 90% by year five.28 Additionally, in the event of breakdowns or process fine-tuning, etc, there is an understated overreliance on spare parts/assistance from the overseas PV machinery supplier,” it said.

4. Polysilicon and Wafer as the Weakest Links

According to the report, polysilicon and wafer segments remain the weakest links in India’s solar value chain due to vulnerability to global price fluctuations. Without strengthening these segments, India’s cell and module industries will continue to depend on imports.

“Despite rapid growth in module capacity, India’s solar manufacturing sector continues to lag in upstream sectors, with several projects delayed beyond 2026. As a result, even new cell and module facilities will remain dependent on imported wafers for the next two years at least, while projects requiring ALMM-compliant modules still rely on imports, leaving upstream stages as the sector’s weakest link,” the iEEFA report said.

5. Visa Woes for Chinese Experts

The report states that visa restrictions for Chinese nationals significantly affected PLI manufacturing timelines. It cites reports noting that India issued only 2,000 visas compared to 2 lakh pre-pandemic—a 99 percent reduction. Indian allied industries depend heavily on Chinese technical expertise for ingot, wafer, and cell production; delays in expert deployment hinder plant commissioning.

“Recognising the impact on investments worth billions of dollars, the Ministry of Commerce introduced expedited visa approvals for PLI beneficiaries in August 2024, which eased manpower constraints. However, progress continued to be slow as the Chinese PV industry faced financial stress, limiting its ability to deploy technical experts abroad. Recent interventions, including a standardised approval procedure and a dedicated visa portal launched in August 2024, have improved processing times. However, initial delays led to slower-than-expected capacity ramp-up across the solar manufacturing ecosystem,” the report said.

6. Global Raw Material Price Volatility

Price instability in polysilicon and other raw materials disrupts investment planning for PLI manufacturers, whose operations are highly capital-intensive.

“China’s recent policy changes, including the lowering of export rebates for PV products and the tightening of export licences on key components and assemblies, have heightened India’s exposure to possible disruptions in its upstream supply chain. These risks increase implementation uncertainty for domestic manufacturers under the PLI scheme, who rely not only on stable input costs but also on assured access to imported polysilicon, wafers, and manufacturing equipment,” the report said.

7. Inadequate Incentives

The report states that PLI incentives—Rs 1.5–2 per Wp for fully integrated setups—represent only 5 to 10 percent of production costs, which is insufficient. It notes that incentives are modest compared to international benchmarks.

“For example, the US provides substantially more comprehensive manufacturing support through its Inflation Reduction Act (IRA). The production and investment tax credit mechanisms under IRA can deliver total support exceeding US¢15–20 per Wp, representing three to five times the financial support offered under the PLI scheme,” the report said.

8. Lack of Cost and Scale Competitiveness

“A critical challenge in developing domestic polysilicon manufacturing is achieving cost and scale competitiveness vis-à-vis China. According to market stakeholders, polysilicon production becomes economically viable only beyond 40,000 tonnes per year, while leading Chinese manufacturers operate at scales exceeding 100,000 tonnes annually. These large-scale operations enable significant economies of scale, lowering per-unit costs and enhancing global price competitiveness," the report said.