Domestic solar cells are expected to meet about half of the overall demand in the current financial year, increasing from a fourth in FY26, Crisil said on Thursday.
While the government’s push to reduce dependence on imports has resulted in a strong ramp-up in solar cell manufacturing capacity, such large capacity additions are likely to put pressure on capacity utilisation and realisations, which can stretch payback periods, the analytics company said.
“Domestic supply will gain share and meet around half of the 60-65 Gw demand this fiscal, with imports making up for the rest,” Manish Gupta, deputy chief ratings officer, Crisil Ratings, said, adding that the shift will be led by demand from newer utility-scale bids, net-metering and open-access projects, and government-backed schemes such as Kisan Urja Suraksha Evam Utthaan Mahabhiyan (KUSUM).
Imports, on the other hand, will be for the pipeline of unexecuted utility-scale projects with bids submitted before the August 31, 2025, cut-off. “As the earlier project pipeline winds down, import dependence should fall materially starting next fiscal,” he noted.
After the Ministry of New and Renewable Energy (MNRE) implemented the Approved List of Models and Manufacturers (ALMM) from April 1, 2024, it decided to upstream the production of solar cells through the Approved List of Cell Manufacturers (ALCM), or ALMM List-II, which became applicable from June 2026. However, the government has set up an expert panel to assess ALCM exemption requests for net-metering and open-access projects with installed but uncommissioned modules, or where developers have taken substantive steps towards project implementation.
With rising demand and anticipated reduction in imports, several manufacturers are undertaking capital expenditure to set up or expand solar cell manufacturing capacities. Explaining the impact of surging solar capacity on project economics, Ankit Hakhu, director, Crisil Ratings, said, “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.”
He added that these early movers benefited from higher premiums and 50-60 per cent capacity utilisation after stabilisation, advantages that are likely to narrow as fresh capacity comes on stream. The payback periods are important given the rapid evolution of technology in the sector, shortening the economic life of assets.
Manufacturers pursuing deeper backward integration into ingot and wafer manufacturing are expected to see better returns through higher realisations following the likely applicability of ALMM-III from June 2028 onwards.
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