India urges caution on lending for new solar module capacity as oversupply looms, ministry letter shows
A private security guard walks between rows of photovoltaic solar panels inside a solar power plant at Raisan village near Gandhinagar, in the western Indian state of Gujarat, February 11, 2014. REUTERS/Amit Dave/File Photo
NEW DELHI, Dec 5 (Reuters) - India's clean energy ministry has advised banks and other lenders to be prudent when financing new solar photovoltaic (PV) module manufacturing capacity, warning of potential oversupply in the domestic market, a ministry letter reviewed by Reuters reveals.
Over the past three years, several Indian companies have expanded solar module capacity, aiming to export to the United States. However, higher U.S. tariffs and intensified scrutiny of Indian shipments containing China-made components have weighed on exports, fueling concerns about oversupply as domestic demand for new solar projects has cooled.
The letter directs the finance ministry to instruct lenders to take a calibrated and well-informed approach when evaluating proposals for financing additional standalone solar PV module manufacturing capacity.
Requests for comment to the clean energy ministry and the finance ministry did not receive a response from Reuters.
This marks the first instance of the clean energy ministry publicly acknowledging the risk of solar module oversupply in India’s local markets.
Forecasts from the ministry estimate that India's solar module manufacturing capacity could climb about one-third to 200 GW in the coming years, while cell production might nearly quadruple to 100 GW, potentially surpassing local demand.
To reduce dependence on imports—primarily from China—the ministry recommended prioritizing funding for integrated facilities that can produce solar cells, ingots, wafers, and polysilicon.
The ministry also cited a letter 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.
Reporting by Sethuraman NREditing by Nidhi Verma and Jane Merriman
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