India’s Solar PLI: Domestic Module Manufacturing, Carbon Implications, and What It Means for Industrial RE Procurement
India’s PLI scheme for solar has created committed manufacturing capacity of approximately 26 GW per year by FY2025-26 from 41 manufacturers, growing toward 50–60 GW by FY2027-28. Domestic solar manufacturing changes the embedded carbon of Indian solar installations, the cost of open access RE for industrial buyers, and the Atmanirbhar Bharat tariff architecture. All three dimensions matter for industrial RE procurement strategy.
Key Takeaways
- India’s Production-Linked Incentive scheme for high-efficiency solar PV modules — approved by the Union Cabinet in September 2021 with a total incentive outlay of approximately Rs 19,500 crore over five years — has attracted committed investment from 41 domestic manufacturers, targeting an aggregate module manufacturing capacity of approximately 26 GW per year by FY2025-26 and progressing toward 50 to 60 GW per year by FY2027-28. Major PLI recipients include Adani Solar (4 GW committed capacity), Reliance New Energy (4 GW committed through its partnership with REC Group), Vikram Solar (2 GW), and approximately 35 additional companies across Gujarat, Rajasthan, Andhra Pradesh, and Tamil Nadu.
- The PLI scheme is structured in two tiers. Tier 1 (higher incentive, approximately Rs 14.5 crore/MW) requires domestic manufacturing of all four components of a solar cell — wafer, cell, module, and polysilicon or ingots. Tier 2 (lower incentive, approximately Rs 12 crore/MW) requires domestic manufacturing of wafer, cell, and module but permits imported polysilicon. The incentive is paid on actual sales of PLI-eligible modules over five years, rewarding higher efficiency and higher domestic content. PLI-eligible modules must meet a minimum efficiency threshold (currently 22 percent for mono-crystalline PERC and 20 percent for standard mono) — incentivising the shift toward higher-efficiency technologies over lower-quality commodity modules.
- The Approved List of Models and Manufacturers (ALMM) — maintained by MNRE — restricts government-procured solar projects (SECI, NTPC, state tenders) to using modules from ALMM-listed manufacturers. Since April 2022, imported Chinese modules are not ALMM-listed — making domestic PLI modules the primary supply source for all government-procured solar capacity. This de facto restriction has been the most important driver of domestic solar manufacturing growth — not the PLI incentive alone but the combination of PLI incentive and ALMM demand pull. For industrial open access solar buyers (who are not government-tendered and not bound by ALMM), the PLI’s effect is to build a domestic supply base that will reduce module prices over time through scale economies.
- The Basic Customs Duty on imported solar modules — 40 percent since April 2022, on top of the ALMM restriction — has created a price wedge that protected early domestic manufacturing capacity from cheaper Chinese imports during the PLI programme’s scale-up phase. As domestic PLI capacity reaches commercial scale and costs approach Chinese import costs (minus the 40 percent tariff premium), the BCD protection will become less necessary for competitiveness. The government’s intended trajectory is to allow BCD to rationalise downward as domestic manufacturing achieves scale cost competitiveness — but the timing of this rationalisation is uncertain and affects the competitive economics of industrial open access solar procurement.
- The carbon implication of domestic solar manufacturing is a reduction in the lifecycle emission intensity of a solar installation relative to a Chinese-imported equivalent. This matters because the embedded carbon of the manufacturing process contributes to the lifecycle emission profile of a solar installation — and for CBAM additionality verification purposes, the carbon footprint of the manufacturing process may be considered when verifying the overall low-carbon credential of the renewable electricity produced. Indian PLI modules manufactured using India’s grid electricity (at WAEF 0.710 tCO₂/MWh, declining with grid decarbonisation) have a manufacturing-phase carbon footprint that will progressively improve as India’s grid cleans up. Chinese modules manufactured using China’s coal-heavy grid (approximately 0.80–0.85 tCO₂/kWh national average) have a higher manufacturing-phase emission — a distinction that matters for the lifecycle carbon accounting increasingly used in EU green procurement specifications.
- For industrial open access RE buyers, the PLI’s most direct implication is the expected decline in domestic module prices as PLI capacity reaches commercial scale. Current domestic PLI module prices are approximately Rs 22 to 25 per Watt peak — compared to Chinese import prices of Rs 16 to 18 per Watt peak (before the 40 percent BCD). As PLI manufacturing achieves scale efficiency and manufacturing costs fall, domestic module prices are expected to converge toward Rs 18 to 21 per Watt peak by FY2027-28. This price convergence, combined with the tariff protection’s continuation, would leave domestic modules cost-competitive with BCD-adjusted imported modules — and potentially cheaper if Chinese silicon and wafer costs rise due to geopolitical supply chain pressures.
India’s solar manufacturing ambition sits at the intersection of three distinct policy objectives: energy security (reducing dependence on Chinese supply chains for a strategically critical clean energy input), industrial development (creating a domestic manufacturing sector with job creation and value-added benefits), and climate ambition (enabling India’s renewable capacity targets at competitive cost). The PLI scheme is the primary instrument for pursuing all three simultaneously — and its success in building domestic module manufacturing capacity has been considerable, even if the pace has been slower than the most optimistic projections.
For industrial open access RE buyers — the aluminium smelters, steel plants, fertiliser manufacturers, and chemical producers that are building private solar procurement programmes in response to CCTS GEI targets and CBAM embedded emission requirements — the PLI’s progress matters in three ways. First, expanded domestic module supply increases the volume of modules available for non-government buyers, reducing the procurement competition between government-tendered utility-scale projects and industrial captive installations. Second, the cost trajectory of PLI modules (declining toward Rs 18 to 21 per Watt peak by FY2027-28) directly affects the capex of captive solar and the PPA tariff for open access procured solar — both of which feed into the landed cost of renewable electricity for industrial consumers. Third, the PLI module’s improving carbon footprint as India’s manufacturing grid decarbonises may become relevant for EU supply chain due diligence assessments that increasingly scrutinise the provenance and lifecycle carbon of solar components used in the supply chains of European industrial customers.
The BCD tariff architecture and its industrial procurement implications
The 40 percent Basic Customs Duty on imported solar modules — combined with the ALMM restriction on government procurement — has created a two-tier solar module market in India. Government-procured projects (SECI, NTPC, state DISCOMs) must use ALMM-listed domestic modules and cannot access Chinese imports at any price. Industrial open access buyers and captive solar developers are not bound by ALMM — they can technically import non-ALMM modules for their captive installations. However, the 40 percent BCD applies to all importers, making Chinese module imports at Rs 16 to 18 per Watt peak effectively equivalent in landed cost to domestic PLI modules at Rs 22 to 25 per Watt peak after the duty is applied. This artificial price parity — the government’s intended outcome — has channelled most industrial open access module procurement toward domestic PLI suppliers.
Solar Module Cost Comparison — Domestic PLI vs Chinese Import (BCD-Adjusted) · April 2026
| Module Source | FOB Price | BCD (if import) | Landed Cost India | Efficiency (typical) | CBAM Additionality Consideration |
|---|---|---|---|---|---|
| Chinese mono-PERC (non-ALMM) | Rs 16–18/Wp (export price) | +40% BCD → Rs 22–25/Wp | Rs 22–25/Wp (equivalent to domestic) | 22–24% | Manufacturing grid ~0.80–0.85 tCO₂/kWh — higher manufacturing-phase carbon than domestic PLI |
| Domestic PLI mono-PERC (ALMM-listed) | Rs 22–25/Wp (current) | No BCD (domestic) | Rs 22–25/Wp | 21–23% | Manufacturing grid declining toward 0.50 tCO₂/kWh by 2030 — improving manufacturing-phase carbon |
| Domestic PLI TOPCon (next-gen, emerging) | Rs 26–30/Wp (premium, limited scale) | No BCD | Rs 26–30/Wp (premium) | 24–26% | Higher efficiency reduces land requirement and system BOS cost; improving manufacturing carbon |
| Domestic PLI mono-PERC (FY2027-28 projected) | Rs 18–21/Wp (PLI scale economies) | No BCD | Rs 18–21/Wp | 22–23% | Converging with international prices; PLI manufacturing scale improving cost competitiveness |
Why the PLI’s carbon argument matters for industrial buyers building CBAM-compliant RE procurement. When an aluminium smelter installs captive solar to reduce its CBAM Scope 2 embedded emissions, the CBAM Implementing Regulation requires additionality verification — confirming that the renewable electricity comes from a new additional source, not from an existing renewable project that already supplies another buyer. The additionality verification scrutinises the entire procurement chain — including, in some cases, the manufacturing provenance of the solar modules. As EU supply chain due diligence regulations (CSDDD) begin requiring industrial buyers to disclose the carbon footprint of key input supply chains, the provenance of solar modules used in industrial captive installations may become a disclosure item. Indian PLI modules manufactured on India’s decarbonising grid will have a progressively lower manufacturing-phase carbon footprint than Chinese modules manufactured on China’s coal-heavy grid — a distinction that could become commercially relevant in EU customer supply chain assessments by 2028 to 2030.
Frequently Asked Questions
Does using PLI-manufactured solar modules make a captive solar installation more CBAM-compliant?
The CBAM additionality requirement for renewable electricity focuses on whether the generation source is genuinely new and additional — not on the manufacturing origin of the solar modules. A solar installation using Chinese-manufactured modules that genuinely generates new renewable power for an industrial facility’s exclusive consumption satisfies CBAM additionality just as much as the same installation using PLI-manufactured domestic modules. The module manufacturing provenance does not affect the CBAM Scope 2 embedded emission calculation for the electricity generated. However, the EU CSDDD supply chain disclosure regulations (applying to large EU companies from 2027 and smaller companies progressively) may require disclosure of the upstream carbon footprint of key supply chain inputs — including solar modules used by industrial suppliers of EU companies. In that context, the lower manufacturing-phase carbon of PLI modules could become a supplier qualification differentiator.
What is the Approved List of Models and Manufacturers and does it apply to industrial captive solar?
The ALMM is a MNRE-maintained list of solar module models and manufacturers that meet defined quality and performance standards for use in government-funded or government-procured solar projects. ALMM restriction applies to projects procured by SECI, NTPC, state DISCOMs, and public sector entities — it does not apply to private industrial captive solar installations or open access RE projects procured by private industrial buyers. An industrial company building captive solar can use non-ALMM modules, including imported modules, for its own generation — subject to the 40 percent BCD on imports. The ALMM restriction has been the most powerful tool for stimulating domestic manufacturing demand, but it does not constrain industrial captive solar procurement choices.
When will PLI-manufactured modules reach full cost competitiveness with Chinese imports?
Full BCD-unadjusted cost competitiveness — where domestic PLI modules are cheaper than Chinese modules even without the 40 percent import duty — requires domestic manufacturing costs to decline from the current Rs 22 to 25 per Watt peak to approximately Rs 16 to 18 per Watt peak. Most industry analysts project this convergence by approximately FY2027-28 to FY2028-29 as PLI manufacturing achieves full scale, and if Chinese module prices remain at current levels driven by global demand and domestic China supply chain dynamics. If Chinese prices fall further (due to overcapacity in China’s module manufacturing sector), the convergence timeline extends. The government’s contingency is that the BCD provides tariff protection through the convergence period — the BCD level can be maintained as long as domestic competitiveness requires it.
Sources
- MNRE — PLI scheme for Solar PV Modules — approved manufacturers list, capacity targets, and incentive structure
- MNRE — Approved List of Models and Manufacturers (ALMM) — current listed manufacturers
- Ministry of Finance — Basic Customs Duty notification on solar cells and modules — 40% from April 2022
- JMK Research — India solar module manufacturing and PLI tracker — capacity and cost trajectory 2025
- BloombergNEF — Global solar module price tracker — Chinese vs India domestic cost comparison
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