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MNRE Warns of Solar Module Oversupply, Advises Banks to Focus Funding on Upstream Manufacturing

The Ministry of New and Renewable Energy (MNRE) has urged banks and financial institutions to be cautious when financing new solar PV module manufacturing projects, citing a sharp rise in domestic overcapacity. India’s module manufacturing capability has reached nearly 150 GW — including about 122 GW under the ALMM — which is already 200–250?ove current demand and could surpass 200 GW in the coming years.

The ministry’s advisory follows concerns raised by the All India Solar Industries Association (AISIA), which warned that module capacity has expanded to almost four times annual demand and that unchecked lending risks creating unsustainable debt loads and potential NPAs. AISIA has called for greater due diligence before extending fresh credit for module or cell production.

While module output is in surplus, MNRE highlighted a stark imbalance across the solar value chain. India has around 27 GW of solar cell manufacturing capacity, expected to exceed 100 GW soon, but upstream segments remain underdeveloped — with only about 2 GW of ingot and wafer capacity and no commercial polysilicon production. To address this mismatch, MNRE recommended that lenders prioritise financing integrated facilities and upstream components such as polysilicon, ingots, wafers, solar glass and aluminium frames, where significant gaps persist.

The ministry has requested the Department of Financial Services to guide banks, NBFCs and renewable-energy lenders — including PFC, REC and IREDA — to align future lending with market realities and long-term sector trends. This comes as India’s solar manufacturing sector rapidly expands under domestic schemes, even as demand volatility and pricing pressure challenge the viability of many manufacturers.