India is preparing a new production-linked incentive (PLI) scheme to encourage domestic manufacturing of polysilicon, a critical raw material used in solar photovoltaic panels. The proposed programme is aimed at reducing India’s dependence on China for a key part of the solar supply chain and building a more integrated domestic manufacturing ecosystem.
The planned incentive comes as India rapidly expands renewable-energy capacity while seeking greater control over the manufacturing inputs needed for its clean-energy transition. Santosh Kumar Sarangi, secretary at the Ministry of New and Renewable Energy, said the proposed scheme would extend India’s manufacturing incentives deeper into the solar supply chain.
India Plans PLI Scheme for Polysilicon
The proposed PLI scheme would provide incentives for companies manufacturing polysilicon in India. The government has not yet disclosed the size of the financial support, but the programme could cover more than 10 GW of production capacity, according to Sarangi.
Polysilicon is an essential material used to manufacture solar cells and modules. India currently relies entirely on imports from China for polysilicon, making the material a significant vulnerability in the country’s solar manufacturing ambitions.
The new scheme would therefore represent a deeper extension of India’s existing efforts to localise solar manufacturing.
Key Details of the Proposed Scheme
| Parameter | Details |
|---|---|
| Scheme | Production-linked incentive for polysilicon |
| Target | More than 10 GW of production capacity |
| Main objective | Reduce import dependence |
| Current polysilicon dependence | India relies entirely on imports from China |
| Incentive amount | Yet to be disclosed |
| Sector | Solar photovoltaic manufacturing |
| Broader goal | Build an integrated domestic solar supply chain |
The government is seeking to create a supply chain covering everything from raw materials to finished solar modules.
Why Polysilicon Is Important
Polysilicon sits near the beginning of the solar manufacturing chain.
The material is processed into ingots and wafers, which are then used to manufacture solar cells. Cells are subsequently assembled into solar modules.
This means that even if India has large module and cell manufacturing capacity, dependence on imported polysilicon can leave an important part of the supply chain exposed to overseas suppliers.
India’s proposed incentive scheme is intended to address this upstream gap.
The government wants to develop domestic capabilities across modules, cells, wafers, ingots and polysilicon rather than concentrating only on the final stages of manufacturing.
China Dominates the Global Supply Chain
China currently dominates several stages of the global solar manufacturing chain, including polysilicon, wafers, cells and modules.
For India, this dependence creates both economic and strategic concerns.
Importing large quantities of critical solar materials exposes manufacturers to changes in global prices, trade restrictions, shipping disruptions and geopolitical tensions.
Developing domestic production could provide greater supply security while allowing Indian companies to capture more value from the rapidly expanding renewable-energy industry.
India Has Already Invested in Solar Manufacturing
The proposed polysilicon incentive is not India’s first effort to develop domestic solar manufacturing.
The government has previously allocated ₹24,000 crore, or about $2.52 billion, through manufacturing-linked incentives for solar panel and cell production.
Those programmes have helped encourage investment in domestic module and cell manufacturing.
The next challenge is moving further upstream.
By supporting polysilicon production, India can potentially create a more complete domestic manufacturing chain and reduce the need to import critical intermediate materials.
India Has Built More Than 200 GW of Module Capacity
India’s solar manufacturing capacity has expanded rapidly.
According to Sarangi, the country has already built more than 200 GW of solar panel manufacturing capacity and more than 32 GW of solar cell capacity.
Another 100 GW of solar cell capacity is expected to come online within approximately a year.
The rapid expansion shows that India’s manufacturing ambitions are moving beyond individual factories toward a much larger industrial ecosystem.
However, the supply chain will remain incomplete unless India also develops adequate capacity for upstream materials.
80 GW of Ingots and Wafers Targeted
India is also targeting at least 80 GW of solar ingot and wafer manufacturing capacity by June 2028.
Ingots and wafers sit between polysilicon and solar cells in the production process.
The government’s targets therefore indicate an attempt to build an integrated manufacturing chain rather than focusing on individual stages.
Solar Manufacturing Chain
Polysilicon → Ingots → Wafers → Solar Cells → Solar Modules
India is currently strengthening several of these stages, with the proposed polysilicon scheme intended to address one of the most upstream components.
500 GW Non-Fossil Capacity Target
The manufacturing push is closely connected to India’s renewable-energy ambitions.
India has set a target of 500 GW of non-fossil fuel power capacity by 2030.
Solar power is expected to account for a major share of the additional capacity required to reach that goal.
As solar installations expand, demand for modules and the materials used to manufacture them will also increase.
The government therefore wants domestic manufacturing capacity to grow alongside deployment.
Energy Security Is Becoming a Major Consideration
The move toward domestic polysilicon production is not only about industrial policy.
It is also increasingly linked to energy security.
Solar power reduces dependence on imported fossil fuels over the long term, but relying heavily on imported solar equipment can create another form of external dependence.
By developing domestic manufacturing capabilities, India could reduce vulnerabilities at both ends of the energy system.
The objective is therefore to build a renewable-energy sector that is less dependent on foreign supply chains.
Polysilicon Has Semiconductor Applications
The economic importance of polysilicon extends beyond solar energy.
The material also has applications in semiconductor manufacturing, meaning domestic polysilicon production could potentially provide benefits to India’s broader electronics and semiconductor ambitions.
This could become increasingly relevant as India seeks to establish itself as a manufacturing destination for semiconductor and electronics companies.
However, solar-grade polysilicon and semiconductor-related materials can have different purity and processing requirements, so developing solar polysilicon capacity would not automatically create a complete semiconductor-grade supply chain.
India Wants an Integrated Solar Ecosystem
The government’s broader objective is to establish an integrated solar manufacturing ecosystem.
That would allow companies operating in India to source a larger share of their inputs domestically.
Such integration can provide several advantages.
Lower Import Exposure
Domestic production can reduce dependence on overseas suppliers.
Supply Security
Local manufacturing can reduce exposure to international disruptions.
Industrial Development
More stages of the manufacturing chain would create opportunities for Indian companies.
Employment
Large manufacturing facilities can generate direct and indirect employment.
Export Potential
A deeper domestic supply chain could eventually make India a more competitive exporter of solar products.
Challenges in Building Polysilicon Capacity
Despite the government’s push, establishing polysilicon manufacturing in India will not be easy.
Polysilicon production is highly capital-intensive and requires large amounts of electricity and sophisticated manufacturing technology.
The economics are also challenging because Chinese producers operate at enormous scale and have built highly integrated supply chains.
Indian manufacturers will therefore need to compete against established global producers while managing relatively high upfront investment requirements.
Electricity Costs Will Matter
Polysilicon manufacturing is energy-intensive.
Competitive electricity prices will therefore be important for Indian producers.
If domestic production costs remain significantly higher than imported material, government incentives may need to bridge part of the cost gap.
The availability of reliable and increasingly renewable electricity could become an important factor in determining whether domestic polysilicon plants can compete internationally.
Scale Will Be Critical
China’s dominance has been built partly on enormous manufacturing scale.
Indian companies will need to develop sufficiently large facilities to achieve competitive costs.
The government’s proposed support for more than 10 GW of capacity could help create that scale.
However, actual investment decisions will depend on the final incentive structure, expected market demand, access to technology and long-term economics.
Global Supply Chains Are Being Reconsidered
India’s decision comes amid a broader global effort to diversify critical clean-energy supply chains.
The United States and other economies are also seeking to reduce dependence on China for strategically important materials and technologies.
The US recently announced measures targeting imported polysilicon and related solar and semiconductor products, including a 15% tariff and minimum import prices, as part of an effort to strengthen domestic production.
This broader shift could create opportunities for countries such as India to attract investment into alternative manufacturing hubs.
India Could Benefit From Supply-Chain Diversification
As companies seek alternatives to China, India could become an increasingly important location for solar manufacturing.
The country has a large domestic market, expanding renewable-energy capacity and an established base of solar-module manufacturers.
If upstream manufacturing develops successfully, India could eventually move from being primarily a major solar deployment market to becoming a significant producer and exporter of solar components.
The proposed polysilicon incentive is an important step toward that objective.
Impact on Solar Manufacturers
Domestic polysilicon production could eventually benefit Indian solar manufacturers by providing an additional local source of raw material.
However, the benefits may not be immediate.
New polysilicon facilities can take years to build and reach commercial scale.
Until sufficient domestic capacity becomes available, Indian manufacturers will continue to depend heavily on imported materials.
The success of the policy will therefore depend on how quickly investments translate into operational capacity.
Potential Impact on Solar Costs
One important question is whether domestic manufacturing will make solar equipment cheaper or more expensive.
Chinese manufacturing has achieved extremely low costs through scale and supply-chain integration.
Indian production could initially have higher costs.
Government incentives could reduce the gap, but those incentives also represent a cost to taxpayers or the wider economy.
The policy challenge will be to balance strategic supply-chain resilience with the need to keep solar power affordable.
What Investors Should Watch
Investors and industry participants will be watching several developments following the government’s announcement.
Key indicators include:
- Final size of the polysilicon PLI scheme
- Eligibility criteria
- Number of companies participating
- Planned production capacity
- Investment commitments
- Technology partnerships
- Cost of domestic polysilicon
- Ingots and wafer capacity additions
- Solar-cell capacity growth
- Import dependence
- Export opportunities
The final design of the incentive programme will be particularly important because polysilicon projects require substantial upfront capital.
Broader Impact on India’s Renewable Sector
The policy could strengthen India’s renewable-energy manufacturing ecosystem over the long term.
A more integrated supply chain could reduce India’s vulnerability to international disruptions while increasing the domestic economic value created by the country’s solar expansion.
It could also encourage investment in related industries, including chemicals, industrial equipment, power infrastructure and semiconductor materials.
The effect could therefore extend beyond solar-panel manufacturing.
Industry Impact
India’s proposed polysilicon incentive marks a significant shift toward building the country’s solar supply chain from the top down.
The country has already developed large module and cell manufacturing capacity, but dependence on imported polysilicon remains a major gap. The new PLI scheme could help address that weakness and support the government’s broader goal of developing an integrated domestic ecosystem.
If successful, the programme could help India reduce its reliance on China, attract large-scale manufacturing investments and strengthen its position in global clean-energy supply chains. The biggest challenge will be achieving competitive production costs while maintaining sufficient scale and technology capabilities.
Looking Ahead
India’s planned polysilicon PLI scheme represents an attempt to close one of the biggest remaining gaps in its solar manufacturing ambitions. The government is targeting more than 10 GW of polysilicon production capacity under the proposed programme, while separately aiming for at least 80 GW of solar ingot and wafer manufacturing capacity by June 2028.
The policy comes at a time when countries are increasingly seeking to diversify clean-energy supply chains away from China. For India, developing domestic polysilicon production could strengthen energy security, support manufacturing investment and create opportunities across solar and potentially semiconductor-related industries. However, the success of the initiative will ultimately depend on the size of the incentives, the scale of private investment and whether Indian producers can eventually compete with China’s highly integrated and cost-efficient supply chain.
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