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India's Solar Cell Manufacturing Capacity is Set to Touch 50-55 GW by Fiscal 2027: Crisil Ratings

February 07, 2025. By News Bureau

India's solar cell manufacturing capacity is set to touch 50-55 GW by fiscal 2027, up five-fold from 10 GW at the end of fiscal 2024, propelled by the government’s policy thrust to reduce imports of cells and modules. The expansion will entail a capital expenditure (capex) of INR 28,000-30,000 crore, likely to be funded through a 70:30 debt-equity mix.

That said, healthy balance sheets and robust cash accrual will support credit quality. A Crisil Ratings study of four domestic cell manufacturers, which accounted for 54 percent of total cell manufacturing capacity as on March 31, 2024, indicates as much. The 'Make in India' initiative, bolstered by policy measures aimed at reducing imports of cells and modules, will drive backward integration strategies of module manufacturers, leading to higher domestic cell capacity. India’s module making capacity had increased to ~60 GW by March 2024 from 7 GW in March 2020. This has ensured module imports decline to 25 percent of total consumption this fiscal from 45 percent in the last.

However, import of cells – a key input for module manufacturing – mostly from China, remains high at 80 percent. With domestic cell supply inadequate, import dependence could rise given likely renewable capacity addition. Crisil Ratings expects 60-65 GW of solar capacity to be added over the two fiscals by 2027.

Says Ankit Hakhu, Director, Crisil Ratings, “To boost domestic demand and cell making capacity, the government has mandated use of cells only from its approved list of cell manufacturers (ALCM)1 in open access and net metering projects and projects where it is either providing funding assistance or acting as a counterparty. Among other measures, the Production-Linked Incentive (PLI) scheme and domestic content requirement, too, will invigorate local manufacturing. All these have led to cell capacity expansion announcements of 45-50 GW, which will take India’s overall cell making capacity to ~55 GW over the next two fiscals.”

The increase in cell capacity will enhance self-reliance as well as cell level integration. For instance, in a domestically manufactured cell, potentially 70-80 percent of the module cost can get captured within India (vis-à-vis only 40-50 percent without it). Plus, the proportion of domestic module capacity supported by domestic cell capacity is expected to increase to more than 50 percent from less than 15 percent in fiscal 2024.

Says Ankush Tyagi, Associate Director, Crisil Ratings, “Despite the sizeable capex, the average annual capex intensity will not rise materially — projected at 1.3-1.5 times over the three years till fiscal 2027 vis-à-vis ~1.2 times over the past three fiscals. This will be supported by the expansion in the earnings base driven by the increased module capacity in the past few years and robust operating margins backed by ALMM3 implementation. Given the healthy demand outlook, the payback period for the capex is expected to be healthy, at 4-5 years.”

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solar cell manufacturing in India

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