Summary:
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## **1. Background and Trigger for the OM**
MNRE received a letter from AISIA dated **31 August 2025**, raising alarms about excessive capacity creation in solar PV module manufacturing in India. AISIA pointed out:
* Domestic **module manufacturing capacity is nearly 4× India’s annual demand**.
* Continued lending for new standalone module and cell units could damage both:
* the solar manufacturing industry
* the banking system through **future NPAs**
* Banks must shift lending to **upstream segments** where real shortages exist (polysilicon, wafers, glass, ancillaries).
AISIA had earlier written to the **Chairperson, Indian Banks’ Association (IBA)** requesting a national-level lending advisory.
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## **2. Key Data Points Presented by MNRE**
MNRE validated AISIA’s concerns and provided updated national capacity figures:
### **Solar Module Manufacturing**
* Installed capacity: **~150 GW**
* 122 GW under ALMM
* This is **200–250% higher** than domestic demand.
* Expected to exceed **200 GW** in coming years.
### **Solar Cell Manufacturing**
* Current capacity: **~27 GW** (slightly below demand)
* Expected to surpass **100 GW** soon, likely exceeding domestic requirements.
### **Upstream Components – Acute Shortage**
* Polysilicon: **0 commercial-scale capacity**
* Ingot & wafer: only **~2 GW**
* Solar glass: **~15 GW**
* Aluminium frames: **~17 GW**
MNRE stresses the imbalance: **downstream module/cell capacity is booming**, while **upstream value chain is weak and underfunded**.
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## **3. MNRE’s Official Stance**
MNRE strongly aligns with AISIA’s concerns and observes that:
* Lending decisions for new module plants should involve **comprehensive market assessment**.
* Financial institutions must consider whether new proposals match **sectoral needs** and **long-term viability**.
* Future funding should focus on:
* **Integrated manufacturing facilities** (polysilicon → wafer → cell → module)
* **Upstream segments** where India lacks capacity
* **Ancillary manufacturing** such as glass, backsheets, and frames
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## **4. MNRE’s Direction to DFS, PFC, REC, and IREDA**
The Memorandum formally **requests the Department of Financial Services (DFS)** to advise all Banks, NBFCs, and Financial Institutions to:
### **A. Adopt a calibrated, cautious lending strategy for:**
* Standalone module manufacturing
* Standalone cell manufacturing
### **B. Prioritize funding for:**
* Integrated plants covering upstream stages
* Polysilicon, ingot, wafer manufacturing
* Solar glass, aluminium frames, ancillaries
* Any segment where **domestic capacity is lower than projected demand**
This seeks to **prevent overcapacity**, **avoid NPAs**, and **strengthen the domestic solar value chain**.
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## **5. AISIA’s Advocacy and Supporting Letters**
AISIA submitted two letters dated **31 August 2025**—one to MNRE and one to IBA—highlighting:
### **Key Concerns**
* Modules/cells capacity far exceeds domestic need.
* Risks of speculative investments driven by incentives.
* Banks must evaluate promoter strength, execution capability, and market viability.
### **Recommendations to IBA**
* Issue a **Bank Lending Advisory Note** to all banks.
* Avoid lending to inexperienced or speculative entities.
* Encourage financing for:
* Polysilicon
* Ingots/wafers
* Glass, backsheets
* Other ancillaries
### **Underlying Principle**
To build a **resilient, complete domestic supply chain**, lending must shift from **overcrowded downstream segments** to **strategic upstream industries**.
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