India Solar Panel Factories Halt Output Amid Domestic Cell Shortage

India's domestic solar panel industry is under heavy strain in July 2026 as a wave of factory shutdowns spreads across the sector. Manufacturers report that a shortage of locally made solar cells is forcing them to idle their production lines, with waiting times of six to eight months for domestic components that were previously imported from China.

The disruption stems from new sourcing rules that took effect on June 1, 2026. Under the Approved List of Models and Manufacturers framework, government-backed, net-metered and open-access solar projects must now use solar cells made by approved Indian manufacturers rather than Chinese imports. The measure is designed to strengthen India's domestic manufacturing base, but it has exposed a sharp gap between the country's ability to build finished panels and its capacity to produce the cells inside them.

According to the All India Solar Module Manufacturers Association, close to a third of the country's roughly 140 small and medium panel makers have halted output, while the rest have cut their production cycles to just three to four days. These smaller firms account for about 60 percent of India's module manufacturing capacity. Panels built with scarce domestic cells now cost almost double those made with Chinese cells, squeezing both margins and order books.

The scale of the mismatch is striking. Indian firms have built module manufacturing capacity of roughly 200 gigawatts, yet the government estimates domestic cell output at only about 27 gigawatts of nameplate capacity. Research groups place the effective operating figure even lower, at around 16 to 18 gigawatts, because much of the installed capacity is not yet running or operates below its rated level. India still relies on China for an estimated 95 percent of its solar cell imports, which rose 37 percent in the last fiscal year to about 1.86 billion dollars.

Industry leaders warn that closing the gap will not be quick. Building technology-intensive cell factories requires large amounts of capital, specialised equipment and lengthy commissioning, and analysts estimate the process could take three to five years. The challenge is compounded by China, which has curbed exports of solar manufacturing technology, equipment and technical support, slowing the pace at which India can bring new cell lines online. The chairman of module maker Icon Solar said his company expects annual output to fall sharply to around 1 gigawatt from 3.2 gigawatts.

The employment stakes are high. Standalone module makers that lack their own cell production employ about 75,000 people, including roughly 45,000 in Gujarat, the western state that serves as the industry's main hub. Manufacturers and analysts say nearly 4 billion dollars of investment is now at risk.

In response to industry pressure, the government has extended the domestic-cell deadline to December 2026 for some projects, citing concerns over shortages and the need to protect existing investments. The manufacturers' association says the waiver offers only limited relief unless it is widened to cover the whole industry.

The wider consequences reach beyond individual factories. The shortage threatens to delay solar installations and raise project costs, which could slow India's drive to reach 500 gigawatts of non-fossil fuel capacity by 2030, up from 288 gigawatts today. Power producers may face a short-term rise of about 35 percent in capital spending until domestic cell capacity scales up. If solar deployment slows, the resulting shortfall is likely to be met with greater use of coal, delaying the country's shift toward cleaner energy.

As of late July 2026 the situation remains active, with no full resolution in sight and manufacturers still waiting for clearer signals on both domestic cell supply and the scope of government relief.