Solar Subsidies in India: Residential Segment

In our current battle with climate change, the most sought-after combat weapon we have is to switch to a clean, renewable and inexhaustible form of energy. India is a country that has ample potential in terms of solar energy, which just about fits the bill when we talk of an alternative source of energy. However, the only challenge that remains here is its efficient utilisation in a cost-effective way.

In this aspect, recent initiatives and developments by the Central Government as well as the State Nodal Agencies (SNAs) include solar subsidies to encourage the use of solar energy.

Solar schemes in India

The development of solar energy was recognised as a national mission after the National Action Plan for Climate Change of 2008. In the year 2010, the Jawaharlal Nehru National Solar Mission (JNNSM) was announced. The aim being establishment of India as a solar leader by the year 2022 with global recognition.

The whole idea of launching a solar subsidy scheme revolved around not only switching to a renewable source of energy, but also indirectly reducing the burden on thermal power plants. Another objective was to minimise the rising electricity bills.

The Ministry of New and Renewable Energy (MNRE) came up with a scheme that offered financial support to set up solar power plants in various states. Later in the year 2015, the Government of India introduced Ujjwal Discom Assurance Yojna (UDAY). This would provide financial assistance in the power sector and work towards the development of renewable sources of energy. But most importantly, it will improve the energy efficiency and overall power conservation.

The next initiative was a major step towards the same with the Solar Energy Corporation of India. It consisted of implementing a large-scale rooftop scheme in 16 cities- big and small, across India. The National Clean Energy Fund (NCEF), offered a subsidised rate of 30% on the installation costs for states across the country. An exception was made for the states of Sikkim, Uttarakhand, Jammu & Kashmir, Himachal Pradesh and Lakshadweep which fell under a selected category in the rooftop solar scheme, and could avail a subsidy of 70% of the benchmarked installation cost.

The main objective of this government initiative was to offer a solar subsidy scheme so that both individuals as well as the organisations are benefited from the solar energy systems at a reduced capital cost.

Solar panels for home

There are numerous benefits of installing solar panels on roof. To begin with, they are extremely suitable for the Indian climate and geography. The fact that the panel installation doesn’t demand extra space and has a service life of over 20 years is a huge attraction and a win-win!

The average cost of installation of a Rooftop PV system is Rs 60,000-70,000. In order to promote solar energy, the government pays 30% of the installation costs and also offers tax credits. So, customers only have to pay around Rs 42,000- 49,000 for the installation. A total of 40% subsidy can be claimed when the benchmark cost is higher than the cost of the unit.

In fact, the tariff rate for rooftop solar panels is 17% cheaper when compared to industrial or commercial tariffs.

Homeowners opting for rooftop PV systems are granted with Priority Sector Loans of up to 10 lakhs by national banks across the country. 60% of the entire cost of installation is eligible for a bank loan, while the remaining 40% is subsidised. This loan can be repaid over the next 5 years according to the interest rates set by the RBI.

The government offers more benefits for customers who install solar panels for home; they are eligible for incentives of Rs.2 per unit (generation-based) of electricity generated. Which means, a customer can earn up to Rs. 2,000-3,000 per annum.

Moreover, people can also opt to sell excess electricity according to the norms set by the government.

Apart from the solar subsidy, the choice of going solar is any day advantageous and a far more secure investment when compared against the fluctuating electricity prices. In the era of going eco-friendly, it is more of a responsibility than a mere choice to opt for an alternative source of energy that is also cost-efficient in the long run.

Indian Perception – before and after the introduction of subsidies

Solar panels for homes come with high installation costs at an initial level. This often leads to a strong hesitation amongst Indians towards installing them. However, it is a known fact that the maintenance costs are much lower, and can actually yield a high return on investment.

There is a steady shift after the introduction of government on solar systems. The shift is visible in industrial, commercial, as well as residential household sectors.

The awareness, has increased tenfold. The benefits of switching to solar energy along with tax credits, financial subsidies, loan options and other generation-based incentives are now laid out publicly by the government in all their solar subsidy schemes to promote and motivate people to make the switch.

As a result of the government’s efforts in driving the country towards a global leader in the solar energy sector. People are finally seeing the brighter side of solar energy. Solar energy is now a new dimension. It is a profitable investment rather than a cost that is incurred during installation. People are willing more than ever to step forward and be more responsible towards the environment.