Indigenous Solar Cells to Meet Nearly Half of India’s Demand After ALCM Mandate: Crisil Ratings

India’s domestic solar cell manufacturers are expected to meet nearly half of the country’s total solar cell demand in FY27, up from around one-fourth in the previous fiscal, driven by the implementation of the Approved List of Cell Manufacturers (ALCM) and rapid expansion of local manufacturing capacity, according to a report by Crisil Ratings.

The ALCM framework, introduced by the Ministry of New and Renewable Energy (MNRE), came into effect in June 2026 and mandates the use of approved domestically manufactured solar cells for utility-scale, net-metering and open-access solar projects, with certain exemptions for residential rooftop installations under the PM Surya Ghar scheme.

According to Crisil Ratings, domestic manufacturers are expected to supply around 30-32 GW of the estimated 60-65 GW solar cell demand this fiscal year, significantly reducing reliance on imports. The shift is expected to be driven by demand from new utility-scale projects, open-access installations, net-metering projects and government-backed programmes such as the Kisan Urja Suraksha Evam Utthaan Mahabhiyan.

“Domestic supply will gain share and meet around half of the 60-65 GW demand this fiscal, with imports making up the remainder,” said Manish Gupta. He added that imports would largely cater to the existing pipeline of projects awarded before the August 31, 2025 cut-off date, after which dependence on imported cells is expected to decline substantially.

To capitalise on the growing domestic demand, manufacturers are accelerating investments in solar cell production. Crisil estimates that India’s solar cell manufacturing capacity will nearly double to about 60 GW by the end of FY27, with additional capacity expected to come online in the following fiscal year.

However, the rapid capacity build-up could pressure industry profitability. Increased supply is likely to lower capacity utilisation levels and compress margins, potentially extending the payback period for new investments.

“Capacities commissioned by the end of this fiscal could see payback periods stretch by one to two years compared with the four to five years achieved by early movers,” said Ankit Hakhu. He noted that earlier entrants benefited from higher premiums and stronger utilisation rates, advantages that may diminish as more manufacturing capacity enters the market.

The report also highlighted that companies pursuing deeper backward integration into ingot and wafer manufacturing could achieve better returns in the future. This is expected to be supported by the proposed implementation of ALMM III from June 2028, which aims to increase domestic value addition and reduce dependence on imported upstream components.

Crisil cautioned that delays in signing power purchase agreements (PPAs) could affect solar module demand, while any significant exemptions granted under the ALCM framework for ongoing projects could influence demand for domestically manufactured solar cells. These factors remain key monitorables for the sector going forward.