Beyond Capital, The Crucial Gaps in India’s Battery and Solar Manufacturing Ambition

Beyond Capital, The Crucial Gaps in India’s Battery and Solar Manufacturing Ambition

India’s green industrial transformation, anchored in its ambitious target of installing 500 GW of non-fossil fuel capacity by 2030, is a defining project of this century. At the heart of this transformation lies a fundamental strategic choice: to move from being a massive importer and assembler of green technology to becoming a self-reliant, globally competitive manufacturing hub. The primary vehicle for this audacious shift is the Production Linked Incentive (PLI) scheme, a performance-based subsidy model lauded for its success in catalyzing smartphone and telecom equipment manufacturing. However, as the scheme tackles the more complex, capital-intensive, and technologically sophisticated terrains of advanced battery cells and high-efficiency solar photovoltaics (PV), a stark reality is emerging. Capital support, while necessary, is proving to be woefully insufficient to bridge the vast chasm between policy ambition and industrial reality. The slow progress, particularly in the most critical upstream segments, reveals that India’s green manufacturing leap requires not just financial de-risking, but a holistic ecosystem built on deep technology absorption, specialized human capital, and a recalibrated industrial policy that prioritizes expertise over balance sheets.

The PLI Paradigm: Success in Telecom, Stumbling in Green Tech

The PLI scheme’s design is elegantly incentive-driven: the government pays out a predetermined sum only after companies achieve agreed-upon annual sales and production targets. This “pay for performance” model was instrumental in attracting global giants like Foxconn and Samsung to expand local smartphone assembly, creating jobs and boosting exports. This success, however, created a potentially dangerous template for extrapolation. Telecom assembly, while valuable, is often at the downstream end of the value chain, involving significant but relatively less complex integration of imported components.

The PLI schemes for Advanced Chemistry Cell (ACC) battery storage (₹18,000 crore outlay for 50 GWh capacity) and High-Efficiency Solar PV modules face a fundamentally different order of magnitude. Here, the goal is not mere assembly but the creation of an entire domestic value chain, from raw material processing to finished, cutting-edge product. The challenges are not just of scale, but of depth, technological mastery, and global competitiveness.

The Solar PV Conundrum: A Lopsided Value Chain

The solar PV sector provides a clear diagnostic of the problem. By mid-2025, downstream module assembly—where imported cells are packaged into panels—was robust, achieving 56% of its PLI target. This is the segment most analogous to telecom assembly. However, the critical upstream segments, which determine true technological sovereignty and value capture, are floundering.

• Polysilicon manufacturing (converting metallurgical-grade silicon to ultra-pure solar-grade silicon) had reached only 14% of its target.

• Wafer manufacturing (slicing polysilicon ingots into thin wafers, the heart of a solar cell) was at a mere 10%.

This stark disparity (56% vs. 14% and 10%) illustrates a classic “last-mile assembly” trap. India is building capacity where it is easiest and least value-additive, while remaining perilously dependent on imported raw materials (polysilicon, wafers, and silver paste) and the specialized, proprietary equipment and technical know-how needed to produce them. These upstream processes are characterized by extreme energy intensity, high capital expenditure (CapEx), continuous R&D for efficiency gains, and razor-thin global margins dominated by a handful of Chinese firms. The government’s consideration of additional capital subsidies to “de-risk” these projects, while understandable, addresses only the symptom—the high upfront cost—and not the underlying disease: a severe deficit of process engineering expertise, operational experience, and integrated supply chains for critical inputs.

The Battery Gigafactory Dream: A Slow-Motion Reality

The story is even more pronounced in the battery sector, which is crucial for electric mobility and grid-scale renewable energy storage. By late 2025, only about 1.4 GWh of the 50 GWh targeted ACC capacity had been commissioned—a paltry 2.8%. Several PLI awardees have already faced steep penalties for missing deadlines, signaling systemic hurdles beyond corporate will.

The bottlenecks here are multidimensional:

1. Stringent Domestic Value Addition (DVA) Norms: The PLI scheme mandates 25% DVA within two years and 60% within five. While well-intentioned to foster deep manufacturing, these targets are exceptionally ambitious for a sector where the global supply chain for critical components—anodes, cathodes, electrolytes, separators—is concentrated and technologically guarded. Building a cathode plant, for instance, requires access to processed lithium, nickel, and cobalt, and mastery of complex chemical synthesis processes. India currently lacks both the raw material sourcing agreements and the chemical engineering ecosystem for this.

2. The “Gigafactory” Complexity: A battery gigafactory is not just a large shed with machines. It is a highly integrated, precision-controlled, and data-driven ecosystem. It requires:

   • Continuous, ultra-pure material flow (dry rooms with near-zero humidity for electrode coating).

   • Extreme manufacturing precision at micron levels.

   • Advanced battery management system (BMS) integration.

   • Massive, reliable, and affordable clean power.

   • Rigorous quality control and testing labs.
     Building this from scratch is a feat of systems integration that very few entities globally have mastered.

3. The Human Capital Black Hole: The most critical, and often understated, challenge is the acute shortage of experienced technical talent. This spans battery chemists, electrochemists, materials scientists, high-precision automation engineers, and gigafactory operations managers. India’s education system produces few specialists in these niche fields. Compounding this is the government’s reluctance to grant visas to Chinese technical experts, who possess the most extensive hands-on experience in setting up and running the world’s largest battery manufacturing facilities. This policy, rooted in legitimate security concerns, creates a paradoxical situation: Indian companies win bids based on promises of international technology transfer, but are then blocked from accessing the very personnel who can execute that transfer on the ground. Expecting Western or Korean partners to fill this gap entirely is unrealistic, as their own talent pools are limited and in high demand.

The Misplaced Faith in Capital and Net Worth

The core fallacy in the current approach is the belief that large capital subsidies, directed primarily at companies with high net worth, will automatically catalyze high-technology manufacturing. This conflates financial capacity with technological capability. The PLI bidding criteria have historically favored large conglomerates with strong balance sheets (the “net worth” criterion) but not necessarily any proven expertise in electrochemistry or polysilicon refinement. These conglomerates then seek international technology transfer agreements, assuming capital can buy capability.

However, technology transfer in these fields is not like buying a blueprint. It is a long, iterative, and tacit process involving the migration of not just documents, but of tacit knowledge—the unwritten, experience-based understanding of how to tweak a chemical process, calibrate a coating machine, or troubleshoot a production line. This knowledge resides in people, not just patents. Without a pipeline of domestic talent and the ability to temporarily import crucial foreign expertise, these capital-intensive JVs risk becoming “empty factories”—state-of-the-art facilities that struggle with yield, quality, and cost competitiveness.

The Path Forward: Recalibrating Policy for Capability, Not Just Capacity

To salvage its green manufacturing ambitions, India must pivot from a singular focus on capital and capacity targets to a holistic strategy for building technological capability. This requires a multi-pronged approach:

1. Revise PLI Criteria: Shift the emphasis in bidding from “net worth” to a balanced scorecard that heavily weights technical capability, R&D partnerships, and detailed human resource development plans. Pre-qualification should require demonstrable access to core technology and a credible team with relevant experience.

2. Create a “Technology Absorption & Skilling” Corollary: Every PLI disbursement for green tech should be linked not just to production output, but to verified milestones in technology absorption and workforce training. A portion of the incentive could fund dedicated “Centres of Excellence” within PLI plants, run in partnership with the Indian Institutes of Technology (IITs) and industrial training institutes (ITIs), to create a pipeline of technicians and engineers.

3. Facilitate Strategic Technical Collaboration: Develop a clear, transparent framework for granting short-term visas to essential foreign technical experts, with appropriate safeguards for intellectual property and security. This should be viewed not as a concession, but as a critical “technology import” for a limited period to enable effective knowledge transfer to the Indian workforce.

4. Foster an Integrated Materials Ecosystem: Policy must simultaneously address the upstream raw material challenge. This involves:

   • Strategic international partnerships for sourcing critical minerals (lithium, cobalt, nickel).

   • PLI-like schemes or strategic government investment for establishing mid-stream chemical processing plants for battery-grade materials and solar-grade polysilicon.

   • Encouraging vertical integration among PLI beneficiaries to secure supply chains.

5. Patient Capital and Realistic Timelines: Recognize that building foundational industries takes a decade or more. Extend PLI timelines, provide more flexibility in meeting DVA targets in the initial years, and consider offering “patient” venture capital or low-interest loans for the high-risk, long-gestation upstream projects, rather than just output-linked subsidies.

Conclusion: Building the Cathedral, Not Just Laying Stones

India’s 500 GW ambition is a national cathedral for the green age. The PLI scheme provided the initial stones and the blueprint. However, the construction is now stuck because the master architects, stonemasons, and engineers—the holders of deep, tacit technological knowledge—are in short supply. Throwing more money at the site (capital subsidies) without solving this talent and know-how crisis will only lead to cost overruns and delays.

The lesson from the sluggish progress in batteries and solar PV is clear: High-technology manufacturing cannot be financed into existence; it must be learned, nurtured, and built ecosystem by ecosystem. India’s next policy move must be to deliberately and strategically invest in the human and intellectual capital required to turn its gigafactory dreams into humming, globally competitive realities. The future of its energy security and industrial prowess depends on building capability, not just subsidizing capacity.

Q&A: India’s Green Manufacturing Challenges

Q1: Why has the PLI scheme been successful in telecom manufacturing but is struggling in solar and battery sectors?

A1: The success in telecom was largely in downstream assembly (putting together imported components into finished devices), which is less technologically intensive and benefits from India’s large workforce. The solar and battery PLI schemes aim to create the entire value chain, from raw materials to finished high-tech products. This involves mastering complex, proprietary processes like polysilicon purification, wafer slicing, and cathode chemistry—fields requiring decades of R&D, specialized equipment, and highly skilled engineers that India currently lacks. The challenge is one of fundamental technological capability, not just assembly scale.

Q2: What is the “lopsided value chain” problem in India’s solar manufacturing?

A2: It refers to the stark disparity in progress between different stages of solar PV production. While module assembly (the final stage) is at 56% of its PLI target, the critical upstream stages—manufacturing polysilicon (14%) and wafers (10%)—are severely lagging. This means India is succeeding in the lower-value, less complex assembly work but remains dependent on imports for the high-value, technology-intensive core components. This keeps the country vulnerable to global supply shocks and captures only a small fraction of the total economic value.

Q3: Beyond money, what are the biggest hurdles to setting up battery gigafactories in India?

A3: The three major non-financial hurdles are:

1. Technical Complexity: Gigafactories require extreme precision, integrated material science processes, and controlled environments (like humidity-free dry rooms), demanding a high level of systems engineering expertise.

2. Domestic Value Addition (DVA) Targets: Mandating 60% local content within five years is extremely ambitious without an existing ecosystem for producing battery-grade materials like cathodes, anodes, and electrolytes.

3. Human Capital Shortage: There is a critical lack of experienced battery chemists, electrochemists, and gigafactory operations managers. Compounding this, visa restrictions often prevent the temporary import of Chinese technical experts who possess the most widespread hands-on experience in building and running such facilities globally.

Q4: Why is the emphasis on companies’ “net worth” in PLI bidding seen as a problem?

A4: Prioritizing net worth selects bidders primarily for their financial strength, not their technological competence. This has led to situations where large conglomerates with no background in electrochemistry or advanced materials win bids, relying solely on promised technology transfer from foreign partners. Without in-house expertise or access to the foreign experts to execute the transfer, these companies struggle to operationalize the complex technology, leading to missed deadlines, poor yields, and an inability to meet stringent DVA norms. The scheme risks funding financially strong but technologically shallow players.

Q5: What key policy shifts are needed to accelerate India’s green technology manufacturing?

A5: Policy must pivot from subsidizing output to building capability:

• Revise Bidding Criteria: Weight technical capability and human resource plans as heavily as financials in PLI selection.

• Link Incentives to Skilling: Tie a portion of PLI payouts to verified training and technology absorption milestones.

• Facilitate Knowledge Transfer: Create a secure, transparent framework for short-term visas for essential foreign technical experts to enable on-ground training.

• Develop the Materials Ecosystem: Launch parallel initiatives (strategic investments, partnerships) to build mid-stream processing for critical minerals and battery/solar materials.

• Adopt Patient Capital Mindset: Acknowledge the long gestation period of these industries, extend timelines, and provide flexible, long-term financing for high-risk upstream projects.