India Solar Push Backfires as Panel Factories Shut Down

29 Jul 2026 CW Team

India's campaign to boost domestic solar manufacturing has encountered major disruption after a new rule requiring locally produced cells for panels led to a wave of factory closures. The measure, which came into force on June one, has caused component shortages that have forced many small and medium module makers to halt production, putting investments worth about Rs four bn at risk. Close to one third of small and medium firms have shut since the rule took effect, the segment accounting for 60 per cent of the market.

Industry participants reported widespread cell unavailability over the past three months and warned of sharp declines in module output. One manufacturer indicated that production of solar modules could fall from three point two gigawatt (GW) to one GW as a result of the policy change. The sector had previously relied heavily on imported cells to fill the shortfall, and the sudden restriction has left many supply chains strained.

The legislation mandates that module assemblers use domestically produced cells, but local cell manufacturing capacity remains far short of demand, leaving an annual gap of about two point six GW. Before the rule, imports from China supplied over 90 per cent of the cells used by Indian module makers. While domestic module assembly capacity is substantial at 200 GW, cell manufacturing capacity stands at only 27 GW, creating a structural mismatch that has tightened prices and slowed output.

The government has set a target of 500 GW of non-hydrocarbon generation capacity by 2030, with solar accounting for 29 per cent of the total, and plans aimed to lift solar from 162 GW currently to more than 292 GW by 2030. Analysts warned that the shortfall in cell production and the shutdowns among smaller makers could jeopardise those expansion plans and delay capacity additions. Policymakers face pressure to bridge the cell capacity gap while preserving incentives for local manufacture.

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