The Ministry of New and Renewable Energy’s decision not to grant a blanket extension to Approved List of Models and Manufacturers (ALMM)-II beyond June 2026 marks an important milestone in India’s solar journey. By requiring notified projects to use approved domestic solar cells, the government aims to strengthen domestic manufacturing, reduce import dependence and encourage investment across the solar supply chain.
The policy reflects a broader shift in India’s clean-energy strategy. The country has largely succeeded in creating one of the world’s largest solar markets. The next challenge is industrial: building a manufacturing ecosystem that captures a greater share of the value, technology and employment generated by that market. While domestic module production has expanded rapidly, much of the upstream supply chain continues to rely on imports. How India addresses these gaps will shape its long-term position in the global solar industry.
Manufacturing Success Ends at Modules
India’s domestic module manufacturing capacity expanded from around 145 GW in 2025 to approximately 172 GW by May 2026, enabling the country to meet more than 90 percent of its module requirements. The scale achieved in a relatively short period has positioned India among the world’s largest solar manufacturing bases.
The picture changes, however, when the rest of the value chain is considered. Domestic solar cell manufacturing capacity stands at around 27–29 GW, meeting only 35–45 percent of national requirements. Wafer manufacturing capacity is approximately 5.3 GW, while ingot capacity remains at only 2–3 GW, together meeting less than 10 percent of demand despite accounting for roughly 22–30 percent of module costs. At the base of the supply chain lies polysilicon, which contributes another 20–25 percent of module costs. Domestic production remains limited and satisfies less than 5 percent of demand.
The result is a manufacturing ecosystem that is strongest at the final stage of production but significantly weaker in the upstream segments where much of the industry’s value addition, production expertise and technological learning occur.
Why Capacity Gaps Persist
The uneven distribution of capacity reflects the very different economics of solar manufacturing. Module assembly is comparatively less capital-intensive and has therefore expanded quickly. By contrast, polysilicon, ingot and wafer production require substantial investments in technology, energy and scale.
Polysilicon production, for example, depends on ultra-high-purity processing, energy-intensive manufacturing systems and large integrated facilities. Similar constraints apply to ingot and wafer manufacturing, where advanced crystal-growing technologies, specialised equipment and highly precise production processes are essential for commercial competitiveness.
These characteristics have enabled a small number of countries to establish deep advantages across the solar value chain. Chinese manufacturers benefit from decades of accumulated expertise, integrated supply chains, specialised equipment ecosystems and access to relatively low-cost power. Scale economies and technological know-how reinforce these advantages, creating significant barriers for new entrants.
India has attempted to address these constraints through measures such as the ₹24,000 crore Production Linked Incentive (PLI) scheme, Basic Customs Duty (BCD) on imported cells and modules, Domestic Content Requirements (DCR) and public procurement preferences. These interventions have expanded domestic manufacturing capacity and encouraged investment. However, success in upstream segments ultimately depends on whether firms can achieve globally competitive costs, technological sophistication and manufacturing scale.
Building Depth Across the Value Chain
The next phase of India’s solar industrial policy is less about expanding assembly capacity and more about building depth across the manufacturing ecosystem.
One priority is to align industrial incentives more closely with the weakest segments of the value chain. Future iterations of the PLI scheme and related industrial policies could place greater emphasis on polysilicon, ingots and wafers, where domestic capabilities remain limited but strategic value addition is substantial.
A second priority is to strengthen international partnerships that complement domestic strengths. Collaborations with countries offering advantages in energy, raw materials or specialised manufacturing capabilities can help reduce costs and accelerate capability development. Partnerships with technology leaders can also support progress in advanced manufacturing processes and production equipment.
A third priority is to improve productivity and technological capability within domestic manufacturing. Commercial solar cell efficiencies in India generally range between 23–25 percent for Tunnel Oxide Passivated Contact (TOPCon) technologies. Global leaders are approaching 26–27 percent commercially and achieving efficiencies above 34 percent in laboratory settings. Narrowing this gap will require sustained investments in research, testing infrastructure, workforce development and process innovation. Emerging technologies such as artificial intelligence, digital twins and predictive maintenance are increasingly shaping competitiveness in advanced manufacturing and will influence how quickly domestic firms can move up the value chain.
The Next Phase of Solar Industrialisation
India’s solar manufacturing strategy is entering a more demanding phase. Expanding module capacity demonstrated that market scale and policy support can stimulate rapid industrial growth. Building globally competitive capabilities in cells, wafers, ingots and polysilicon will be considerably more challenging.
The significance of the ALMM decision therefore extends beyond procurement rules. It signals an attempt to use India’s growing solar market to support a broader industrial transformation. Whether that ambition succeeds will depend on India’s ability to convert market scale into competitive capabilities in cells, wafers, ingots and polysilicon. That transition, more than module assembly alone, will determine how much of the solar industry’s value creation is ultimately anchored within India.