Incentives to Transition to Solar Power

A 1 kW solar PV plant would cost you 75,000. And yes, a 10 KW PV plant costs over ₹5,75,000. Ouch! Isn’t that too big an investment to make? How on earth would you afford it? And why would you, even if you can, make this huge a dent in your savings?

Well, well, well….we do understand. But before you cast away a solar future, you might want to look at the other side of the story. While solar PV plants as such are anything but affordable, the many existing government subsidies and incentives are what make them so. Don’t believe us? Well, read on to see how Indian Government, in its resolve to produce 227 gigawatts of solar power by 2022, avail many a subsidy and incentive to help you, and thereby the whole nation, transition to a solar future.

Solar Power Incentives

Government incentives can broadly be classified into three categories –for residential, institutional and NGO sector; for farmers; for the commercial sector.

A. Incentives for residential, institutional and NGOs.

If you plan to install a solar PV plant in a building belonging to any of the following categories, you are eligible for MNRE subsidy.

    Residential – Independent households

    Social Sector – Registered societies, cooperative housing societies, and multi-storey apartments

    Institutional – Schools, colleges, institutes

    Non-profit organizations – All NGOs including, but not limited to, old-age homes, orphanages etc.

Well, how much subsidy you can avail will depend on where you belong to. MNRE’s latest notification states the following subsidies (in Percentage to the capital cost of the installation) –

    30% for residents of all states

    70% for residents of hilly states – Jammu & Kashmir, Uttarakhand, and Himachal Pradesh

What this means is that if you install a solar PV system in a household or an institution in any of the above-mentioned categories, the Government will provide 30% of its capital cost if you belong to a general category state and 70% of the capital cost if you are a resident of any of the hilly states listed above!

Refer to the table below for a rough estimate of the actual cost, Govt Subsidy and cost after the subsidy. Note that this has been calculated assuming you are eligible for 30% subsidy (that is, you aren’t residing in any of the hilly states that can avail a whopping 70% subsidy)

Solar Plant

Solar Plant Cost Govt. Subsidy Cost After Subsidy Units Monthly Savings Monthly Payback Period
1KW ₹ 75,000 ₹ 22,500 ₹ 52,500 120 ₹ 960 4.5 Years
2KW ₹ 1,40,000 ₹ 42,000 ₹ 98,000 240 ₹ 1,920 4.5 Years
3KW ₹ 2,10,000 ₹ 63,000 ₹ 1,47,000 360 ₹ 2,880 4.5 Years
4KW-1P ₹ 2,50,000 ₹ 75,000 ₹ 1,75,000 480 ₹ 3,840 4 Years
5KW-1P ₹ 3,20,000 ₹ 96,000 ₹ 2,24,000 600 ₹ 4,800 4 Years
10KW-3P ₹ 5,80,000 ₹ 1,74,000 ₹ 4,06,000 1440 ₹ 11,520

3 Years

B. Incentives for farmers

Farmers are eligible for an MNRE subsidy up to 90% on solar water pumps. Well, haven’t you heard the glittering tales of solar irrigation in villages like Dhundi, Gujarat, whose farmers have found their ways to better lives via solar pumps that gift them abundant water supply for their fields and produce excess electricity which they can sell to the grid – which brings us to our favourite incentive of all, net metering.

A Quick Snapshot of Net-metering and Its Benefits

Under net metering, the excess energy that gets produced by the Solar PV system (and let us tell you, there’s got to be much!) is fed into the grid, which can then be utilised to supply electricity to other households of the grid. You will receive credits for the energy your system supplies to the grid, earning you a deduction in your next electricity bill! Isn’t that such an ingenious way to let the world be more solar-energy dependent while saving you money? Know that whoever you are – a farmer with solar pumps, or a house owner who has installed rooftop PV plant, or a commercial unit sourcing its power needs from its own solar PV plants, the excess electricity your solar plant produces can play a pivotal role in your savings in future.

C. Incentives for the commercial sector

Well, there’s also good news to those in the commercial and industrial sector. Sure, they can’t avail the MNRE subsidy covering 30% of the capital cost, but a profit-making commercial entity can claim 40% of the project cost as depreciation in the very first year of installation under Section 32 of the Income Tax Act, 1961.  Accelerated depreciation has been one of the prime influential factors in making many of India’s commercial and industrial units to go solar.