India’s MNRE Redirects Solar Funding to Upstream Segments

PVTIME – India’s Ministry of New and Renewable Energy has issued policy guidelines urging financial institutions to exercise caution when financing new standalone solar module capacity. Funding will instead prioritise upstream sectors, including ingots, wafers, and polysilicon, as well as key auxiliary components, in order to address the structural imbalance in India’s PV supply chain, which is characterised by downstream overcapacity and upstream scarcity.

The official guidance clarifies that lenders should prioritise fully integrated solar manufacturing facilities over pure module assembly lines. The MNRE states that this move aims to extend the industrial chain upstream, building a balanced, resilient manufacturing ecosystem, with funds targeted at areas where there are significant gaps between capacity and demand. Current shortages of solar glass with an annual capacity of 15GW and aluminium frames with an annual capacity of 17GW are highlighted as posing a threat to domestic supply chain stability.

This policy shift follows an urgent alert from the All India Solar Industries Association, which informed the MNRE that module capacity had almost reached four times the domestic annual demand, reaching 122GW under the Approved List of Models and Manufacturers by November, while cell capacity stood at just 18.48GW. The association warned that unregulated financing of module capacity has resulted in assets being left idle and poses potential risks to bank credit.

MNRE data shows that module capacity currently exceeds demand by 200–250%, and it could surpass 200GW in the future. In contrast, upstream ingot and wafer capacity totals only 2GW, and there is no local production of commercial polysilicon, leaving Indian PV manufacturers heavily reliant on imported raw materials. Although module imports have fallen from 3.36 billion US dollars in FY2021/22 to 2.15 billion US dollars in FY2024/25, self-sufficiency in core upstream segments remains below 10%.

In order to boost domestic upstream capacity, the MNRE has proposed mandating the use of locally produced wafers and ingots under the ALMM regime from June 2028. This aligns with India’s $1 billion upstream subsidy scheme, with companies such as Reliance Industries launching fully integrated supply chain layouts. Its Gujarat plant, which covers polysilicon to module production, has an initial capacity of 10GW.

Market analysts have noted that the policy will curb reckless module expansion, but that upstream development requires long-term investment. According to Mercom India data, there are 191.9GW of large-scale PV projects in India’s pipeline, with 162.5GW already tendered, which provides strong demand to support industrial chain upgrading. However, the cost of domestic cell production remains 50% higher than that of Chinese imports, so balancing policy support with market efficiency will be crucial for India’s PV localisation efforts.