Central and State Subsidies Fueling India's Rooftop Solar Boom

India is eager to tap into its vast solar potential, one of the highest globally, to meet its renewable energy targets for 2030 and advance towards its broader objective of achieving net zero emissions by 2070. While the country has made significant strides in utility-scale solar projects, recent efforts by both national and state governments have begun to unlock the potential of the largely untapped rooftop solar segment.

In recent years, India’s solar sector has experienced robust growth, driven by the global push for renewable energy. The declining costs of solar technology have further accelerated the nation's focus on this sustainable energy source. With 300 sunny days annually and an average solar radiation of 4-7 kWh/m²/day, India boasts a remarkable renewable energy potential of 748 GW from solar alone.

The Government of India (GoI) initially concentrated on expanding utility-scale solar projects. However, the focus has recently shifted to rooftop solar, marked by the introduction of the 'Rooftop Solar Scheme,' also known as the PM Surya Ghar Muft Bijli Yojana, in the interim budget for 2024-25 during the lower house elections. In the full Budget 2024-25, the Finance Minister confirmed that this scheme aims to provide 1 crore households with up to 300 units of free electricity each month.

Central Financial Assistance for Solar - Pan India

Under the Surya Ghar Muft Bijli Yojana, the Central Government is providing subsidies directly to people’s bank accounts and offering concessional bank loans to alleviate the cost burden. The government subsidy will cover up to 40 percent of the installation cost of solar panels.

The scheme aims to help poor and middle-class households save between INR 15,000 to INR 18,000 crore annually by receiving free solar electricity and selling surplus power to electricity distribution companies. Additionally, it is expected to help the government save around INR 75,000 crore per year on electricity costs.

The subsidies provided under the scheme include INR 30,000 per kW for installations up to 2 kW. For additional capacity up to 3 kW, INR 18,000 per kW will be provided. For systems above 3 kW, a total subsidy of INR 78,000 will be granted to the consumer. For Group Housing Societies (GHS) or Resident Welfare Associations (RWA), a subsidy of INR 18,000 per kW is provided for common facilities, including EV charging up to 500 kW capacity at INR 3 per kW per house. This upper limit includes individual rooftop plants installed by residents in the GHS or RWA.

The support of state governments is undeniably a crucial component in efforts to reach national solar objectives. Rajasthan, with a total solar potential of 142,310 MW, is the biggest hotspot for India’s solar ambitions. Following Rajasthan are Jammu & Kashmir with 111,050 MW, Maharashtra with 64,320 MW, Madhya Pradesh with 61,660 MW, Andhra Pradesh with 38,440 MW, and Gujarat with 35,770 MW of solar potential. 

While most states are leveraging central financial assistance for rooftop solar initiatives, some have also introduced their own subsidies to boost solar within their jurisdictions. This combined effort is essential for the successful expansion of solar energy across India. Some of the states with notable state solar subsidies and incentives, including rooftop solar, are mentioned below.

Delhi 

The Delhi Solar Energy Policy 2023, notified in March 2024, sets ambitious targets to enhance the state’s solar capacity. It aims to increase the installed rooftop solar capacity to 750 MW within Delhi and access utility-scale solar capacity of 3,750 MW from outside the state. To achieve these goals, the policy offers several incentives to encourage both residential and commercial adoption of solar energy.

Under the new Delhi Solar Policy, a capital subsidy is provided for all solar projects undertaken by residential customers. This subsidy is set at INR 2,000 per kW, up to a maximum of INR 10,000 per consumer. The subsidy amount will be credited through the consumer's first electricity bill following the commissioning of the rooftop solar (RTS) system. This incentive is designed to reduce the initial financial burden on consumers and promote the adoption of solar energy in residential areas.

The policy also introduces a generation-based incentive (GBI) for various categories of consumers, including residential, commercial, and industrial users. For residential consumers, the GBI is set at INR 3 per kWh for systems up to 3 kW, and INR 2 per kWh for systems above 3 kW and up to 10 kW. Group Housing Societies and Residential Welfare Associations (GHS/RWA) can receive INR 2 per kWh for systems up to 500 kW (at 10 kW per house). 

For commercial and industrial consumers, the GBI is set at INR 1 per kWh for the first 200 MW deployed. This GBI provides ongoing financial benefits based on the actual solar power generated, thus incentivizing higher energy production. This is in addition to the CFA offered by the central government.

For Group Housing Societies and Resident Welfare Associations, a subsidy of INR 18,000 per kW is provided for common facilities, including electric vehicle (EV) charging infrastructure, up to a total capacity of 500 kW (at 3 kW per house). This upper limit includes the capacity of individual rooftop solar plants installed by residents within the GHS/RWA, encouraging collective solar energy adoption and infrastructure development.

Gujarat

Gujarat is among the fastest growing regions in terms of renewable energy in India. The state has seen massive investments in the sector in recent years. 

Gujarat has launched the Suryashakti Kisan Yojana (SKY), a forward-thinking scheme designed to empower farmers by enabling them to set up solar panels on their farms. This initiative not only aims to promote sustainable energy but also seeks to double farmers' incomes by allowing them to export surplus energy back into the grid.

Under the SKY scheme, farmers receive a 60 percent subsidy on the cost of the solar project. Additionally, 30 percent of the project cost is provided as a loan with a favourable interest rate of 4.5-6 percent, making it financially accessible. The remaining 10 percent of the cost is borne by the farmers themselves. 

The scheme also offers attractive electricity rates for farmers. For the first seven years, farmers will receive electricity at a rate of INR 7 per unit. After this period, the rate will be reduced to INR 3.5 per unit for the remaining years. Thus, this tiered pricing structure ensures that farmers can maximise their returns from solar energy, providing a significant boost to their income.

Himachal Pradesh

Himachal Pradesh provides a favourable mix of central and state support for rooftop solar installations. Besides the Central Financial Assistance (CFA) provided by the central government, the Himachal Pradesh Energy Development Agency (HIMURJA) offers an additional incentive through a net metering scheme. This scheme allows owners to sell excess electricity generated by their rooftop solar systems back to the grid, earning credits that help reduce their electricity bills.

Additionally, the state offers a subsidy for grid-connected rooftop solar power plants. This subsidy is INR 6,000 per kW and is available exclusively to domestic institutions registered under the Society/Trust Act and the social sector.

Uttarakhand 

In 2023, the Uttarakhand government launched an ambitious solar energy policy aimed at encouraging the adoption of solar power across various sectors.  For residential consumers, the policy offers substantial subsidies for rooftop solar installations. 

Homeowners can receive INR 23,000 per kW for systems ranging from 0-1 kW and INR 17,000 per kW for systems between 1-3 kW. Additionally, community solar projects ranging from 5-500 kW are eligible for a subsidy of INR 15,000 per kW. 

Industrial consumers registered under the MSME Act 2006 also benefit from the policy. They can avail themselves of an interest subsidy of up to 10 percent capped at INR 8 lakhs, for rooftop and captive solar projects. Furthermore, there is a capital subsidy of up to 40 percent of the capital cost, with a maximum limit of INR 40 lakhs, for those investing in solar rooftop and captive solar power plants. These incentives are designed to support small and medium enterprises in adopting sustainable energy solutions.

Solar installations for electric vehicle (EV) charging on government land are eligible for an additional 50 percent concession on land lease payments. The commercial tax department provides a 50 percent reimbursement of state Goods and Services Tax (SGST) on the sale of rooftop solar power plants for five years. Solar power plants are exempt from transmission and wheeling charges or losses, as well as cross-subsidy and additional surcharges under the Virtual Net Metering (VNM) framework.

Manufacturers also benefit from the scheme with priority allotment of government land in solar parks on a long-term lease basis. New manufacturing facilities and ancillary units for solar projects receive a waiver of electricity duty for five years, a 50 percent exemption or reimbursement on stamp duty, and a 50 percent SGST reimbursement. Additionally, there is a 100 percent reimbursement of customs duty on inputs required for manufacturing solar modules and battery storage for five years.

West Bengal 

West Bengal is making significant strides in promoting solar energy adoption through a range of attractive subsidies. These financial incentives are designed to make rooftop solar installations more affordable and accessible, helping to reduce the overall cost of solar panels by up to 30 percent.

One of the key incentives offered by the government is the Net Metering Subsidy, which is available to residential, commercial, and industrial consumers. This subsidy covers 30 percent of the project cost, enabling consumers to benefit from reduced initial investment and ongoing savings through net metering, where excess electricity generated can be fed back into the grid for credits.

For farmers, rural households, and small and medium enterprises, West Bengal provides a Capital Subsidy that also covers 30 percent of the project cost. This subsidy aims to support these sectors in adopting sustainable energy solutions, thus promoting broader economic benefits and energy independence.

In addition to these, there is an Interest Subsidy available for residential, commercial, and industrial consumers. This subsidy offers a 5 percent reduction on the loan amount taken for solar installations, further easing the financial burden and encouraging more widespread adoption of solar energy.