India's clean energy ministry has urged banks and other lenders to exercise caution in financing new solar photovoltaic (PV) module manufacturing capacity, citing the risk of oversupply in the domestic market, according to a ministry letter reviewed by Reuters.
The advisory comes as several Indian companies have expanded solar module capacity in recent years, aiming to export to the United States.
Despite this, higher US tariffs and increased scrutiny on Indian shipments for China-made components have hit exports, raising concerns of excess supply in India, where solar project installations have slowed due to weak demand.
In its letter, the ministry asked the finance ministry to advise lenders “to adopt a calibrated and well-informed approach while evaluating proposals for financing additional standalone solar PV module manufacturing capacity.”
This warning marks the very first time the clean energy ministry has acknowledged the risk of oversupply of solar modules in the domestic market.
India's solar module manufacturing capacity is projected to rise by a third to 200 gigawatts in the coming years, while cell production could grow nearly four-fold to 100 GW, exceeding domestic demand, the ministry said.
To mitigate risks, the ministry has further suggested prioritising funding for integrated facilities capable of producing solar cells, ingots, wafers, and polysilicon, reducing reliance on imports mainly from China.
The letter also referenced a communication from the All India Solar Industries Association urging the Indian Banks' Association to halt funding for new, unviable module manufacturing projects to prevent future bankruptcies.
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