India's Solar Boom Runs on Chinese Wafers: Can the PLI Scheme Change That?

India's solar capacity has grown from a few gigawatts a decade ago to over ninety gigawatts of installed capacity, one of the fastest expansions of any large economy. Almost none of the underlying manufacturing capability behind that growth, however, is genuinely Indian in the sense of controlling the full value chain. The overwhelming majority of solar cells and wafers used even in panels assembled inside India originate from China, and the polysilicon that begins the value chain is dominated globally by a small number of Chinese producers whose scale and cost advantage remains difficult for any other country to match without sustained subsidy.

A supply chain concentrated at every layer

The solar manufacturing value chain runs from polysilicon, to ingots and wafers, to cells, to finished modules. China holds a commanding position at every one of these stages, controlling by most industry estimates more than three-quarters of global polysilicon and wafer production and a similarly dominant share of cell manufacturing capacity. This dominance was not accidental; it followed from a decade of sustained Chinese state support for the sector, aggressive scaling that drove down global costs dramatically and squeezed out competitors in Europe, the United States and elsewhere in the 2010s, and vertically integrated firms that could absorb thin margins during periods of oversupply in ways smaller manufacturers elsewhere could not.

India's domestic solar manufacturing historically concentrated at the module assembly stage, the easiest and least capital-intensive layer, essentially putting Chinese cells into locally assembled panels and counting the result as domestic manufacturing for policy purposes. This is not a meaningless step, since module assembly does create jobs and some value addition, but it leaves India dependent on Chinese cell and wafer supply for the actual photovoltaic technology that generates electricity, a dependency that becomes strategically uncomfortable in the context of broader India-China tensions since the 2020 border standoff.

Policy responses and their limits

The government's principal tool for changing this has been the production-linked incentive scheme for high-efficiency solar modules, which offers financial incentives tied to actual production output for manufacturers who commit to building integrated capacity from polysilicon or ingots through to finished modules, rather than simple assembly. Alongside this, the Ministry of New and Renewable Energy has maintained an Approved List of Models and Manufacturers, restricting government-backed solar projects to modules from listed domestic or approved manufacturers, and imposed basic customs duty on imported solar cells and modules to make domestic manufacturing more price competitive.

These measures have produced real results at the margin. Several large Indian conglomerates, including Adani, Reliance and Tata Power, have announced or begun building integrated gigawatt-scale manufacturing facilities intended to cover cell and even some wafer production domestically. Cell manufacturing capacity in India has grown meaningfully faster than it would have absent these interventions. Yet the scale gap with China remains vast; a handful of gigawatts of new Indian cell capacity, even fully realised, competes against Chinese capacity measured in the hundreds of gigawatts, and Chinese producers facing domestic oversupply have periodically exported cells and modules at prices low enough to undercut the economics of new Indian manufacturing investment, a pattern global trade analysts describe as a recurring feature of the Chinese solar industry's boom-bust cycles.

The trade-off between cost and sovereignty

This creates a genuine policy tension that deserves honest acknowledgment rather than dismissal from either side. Cheap Chinese solar cells and modules have been a major reason India's solar tariffs fell to some of the lowest levels in the world, benefiting consumers and accelerating the broader renewable transition that India needs for both energy security and its climate commitments. Import duties and domestic content requirements raise the near-term cost of solar deployment, potentially slowing capacity additions at exactly the moment India is racing against its own 2030 renewable targets. Manufacturers building integrated Indian capacity have publicly acknowledged that without duty protection and PLI incentives, they cannot yet compete on cost with Chinese imports, meaning the policy is explicitly trading some near-term deployment cost and pace for medium-term supply chain resilience.

Whether that trade is worth making depends partly on how one weighs strategic vulnerability. A solar sector entirely dependent on imports from a single country with which India has an unresolved and periodically hostile border relationship carries risks that go beyond ordinary commercial supply chain disruption, including the possibility of export restrictions during a future crisis, a scenario China has already demonstrated willingness to use in other sectors such as rare earth exports to Japan in past disputes. Building even partial domestic capacity in wafers and cells, not just module assembly, provides a hedge against that scenario even if it never fully displaces Chinese supply on cost grounds alone.

Polysilicon remains the unsolved layer

The most difficult unresolved piece of the puzzle is polysilicon, the most capital-intensive and technically demanding stage of the value chain, requiring enormous energy inputs and specialised chemical processing expertise that virtually no Indian firm currently possesses at commercial scale. Without domestic polysilicon capacity, claims of a fully indigenous solar supply chain remain aspirational regardless of progress at the cell and module stages, since Indian wafer and cell manufacturers would still ultimately depend on imported or Chinese-sourced polysilicon as their base input. A few announced projects aim to address this gap, but polysilicon plants take years to build and the technology and cost curve advantages held by incumbent Chinese producers, refined over more than a decade of scale operation, will not be closed quickly by any single government incentive scheme.

A realistic horizon

India's solar manufacturing ambition is better understood as a multi-decade project than as a target achievable within the current renewable energy buildout cycle. The PLI scheme and import duties are reasonable, if costly, instruments for nudging private capital toward building the missing layers of the domestic value chain, but they cannot by themselves overcome a decade-long head start built on a different scale of state support than India has been willing or able to commit. The most useful outcome over the next five years would not be full self-sufficiency, an unrealistic bar, but a meaningfully diversified supply base that reduces single-country concentration risk while continuing to bring solar costs down for Indian consumers, an outcome that requires policymakers to resist both the temptation to declare premature victory on domestic manufacturing and the temptation to abandon the effort the moment Chinese import prices dip again.