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India’s Production Linked Incentive (PLI) scheme for high-efficiency solar photovoltaic (PV) modules has driven a sharp jump in domestic manufacturing capacity since its launch in 2021, but significant policy and operational hurdles continue to threaten its long-term impact, according to a new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA South Asia) and JMK Research.
Launched with an initial outlay of Rs 4,500 crore ($517 million) and expanded by another Rs 19,500 crore ($2.24 billion) in 2022, the PLI scheme has triggered strong industry interest and accelerated India’s push for self-sufficiency in solar manufacturing. As of June 2025, India’s PV capacity stands at 3.3 gigawatt (GW) polysilicon, 5.3 GW wafer, 29 GW cell and 120 GW module, with the scheme driving all upstream additions.
“The scheme channels government support towards measurable industrial output, helping build durable, long-term manufacturing capacity,” said Vibhuti Garg, director, IEEFA South Asia.
The report notes that domestic capacity has expanded rapidly since 2022, with operational module and cell manufacturing reaching 120 GW and 29.3 GW respectively. Additions since 2022 amount to 82 GW in modules and 22.7 GW in cells, marking increases of 216 per cent and 344 per cent from 2022 levels.
Still, upstream manufacturing—polysilicon and wafers—remains limited and has come solely through the PLI scheme, underscoring India’s continuing reliance on imports. About 36 per cent of total cell and 24 per cent of module capacity is tied to PLI allocations.
However, the report warns that the scheme’s full potential has yet to be unlocked due to persistent structural issues. “However, the PLI scheme for solar PV manufacturing faces implementation challenges like high capital intensity of upstream integration, inadequate incentives, inconsistencies in trade policy, import dependency, and global raw material price volatility,” said Prabhakar Sharma, senior consultant at JMK Research.
Frequent changes to the Approved List of Models and Manufacturers (ALMM) and mismatches between import restrictions for modules and unrestricted imports of upstream components have created uncertainty for domestic producers. Meanwhile, the requirement for fully integrated wafer-to-module lines demands steep upfront investment, but incentives cover only a small share of production costs.
“India’s reliance on imported machinery, components, and Chinese technical expertise has further slowed capacity ramp-up, a situation worsened by visa restrictions and limited equipment availability,” said Chirag H Tewani, senior research associate at JMK Research.
Global price volatility—particularly in polysilicon and wafers—combined with China’s dominance in upstream production continues to expose Indian manufacturers to cost and supply shocks. Limited domestic polysilicon output is also hampering competitiveness.
Cost overruns and delays in project execution have already reduced the scheme’s realised economic impact. “Delays in implementing PLI solar PV facilities have also limited the scheme’s economic impact,” said Sharma. By June 2025, only 31 GW of the targeted 65 GW module capacity had been commissioned, attracting Rs 48,120 crore in investments and creating 38,500 direct jobs—well below the targets of Rs 94,000 crore and 1.95 lakh jobs.
PLI awardees face significant financial exposure if they fail to meet compliance requirements. The report estimates a cumulative monetary risk of up to Rs 41,834 crore, including penalties, forgone incentives and unrealised revenue.
With the emerging 50 per cent US tariff on Indian solar exports adding pressure, the policy landscape is becoming more challenging and will require strategic adaptation. The report argues that simply extending timelines will not suffice. “Future PLI iterations should focus on improving cost competitiveness, upstream integration and market resilience,” said Aman Gupta, research associate at JMK Research.
Recommended reforms include tax credits, low-cost finance, longer policy horizons, layered incentives, risk buffers for global price volatility and coordinated institutional mechanisms to align trade, manufacturing and investment policies.