India's Solar Panel Manufacturing Capacity Set to Surge to Over 165 GW by 2027

India's solar photovoltaic (PV) module manufacturing capacity is expected to witness substantial growth, rising from the current 109 GW to over 165 GW by March 2027, according to Icra. This expansion is underpinned by robust policy support, including the Approved List of Models and Manufacturers (ALMM), which restricts direct module imports, the imposition of basic customs duty on imported cells and modules, and the Production Linked Incentive (PLI) scheme. The implementation of ALMM List-II for solar PV cells from June 2026 is already spurring expansion in cell manufacturing by module original equipment manufacturers (OEMs), with capacity anticipated to increase to about 100 GW by December 2027 from the current 17.9 GW.

However, the domestic market may face overcapacity. Annual solar capacity installation is estimated at 45-50 GWdc, against a projected annual solar module production of 60-65 GW. Furthermore, recent US tariffs have negatively impacted export volumes, redirecting modules to the domestic market and posing new challenges. This situation could lead to consolidation, particularly among smaller or pure-play module manufacturers.

Vertically integrated manufacturers, with greater supply chain control, are anticipated to benefit in the long term. Profitability for domestic solar OEMs, which was high at approximately 25% in FY25, is likely to moderate due to competitive pressures and overcapacity. The cost of modules using domestic cells is expected to be 3-4 cents per watt higher than those using imported cells.

Impact: This news indicates a significant expansion in a key manufacturing sector crucial for India's energy transition and economic growth. While the policy support is a strong positive, the potential for overcapacity and the impact of international trade policies (like US tariffs) pose risks. This could lead to stock price volatility for companies involved in solar manufacturing, with vertically integrated players potentially outperforming. The sector is critical for India's renewable energy goals and self-reliance. Impact Rating: 7/10

Difficult Terms: • Solar Photovoltaic (PV) Module: The part of a solar energy system that converts sunlight into electricity. • Gigawatt (GW): A unit of power equal to one billion watts, used here to measure electricity generation capacity. • Approved List of Models and Manufacturers (ALMM): A government list specifying approved solar modules and manufacturers, aimed at ensuring quality and promoting domestic production by restricting imports. • Basic Customs Duty (BCD): A tax imposed on imported goods. • Production Linked Incentive (PLI) Scheme: A government initiative to boost domestic manufacturing by providing financial incentives based on production output. • Original Equipment Manufacturers (OEMs): Companies that manufacture products according to a specific design or brand. • Overcapacity: A situation where the production capacity of goods or services exceeds the demand for them. • Vertically Integrated Manufacturers: Companies that control multiple stages of the production process, from raw materials to finished goods. • Operating Profitability: A measure of a company's profit from its core business operations before accounting for interest and taxes.