What are the Incentives Available for Rooftop Solar Installations in India?

Solar incentives are provided to help you affordably install a Solar PV system. You may have a brief idea on central government subsidy offered by The Ministry of New and Renewable Energy (MNRE) is and state government subsidy offered by Maharashtra Energy Development Agency (MEDA) in Maharashtra. However, there are many new policies and incentives that you may not be aware. For solar enthusiasts, we have combined all the information on solar incentives and policies that support your idea of going solar in Solar Insider. Irrespective of the percentage of subsidy that can be claimed, you can save thousands of rupees on a solar PV system.

In India, the following are the subsidies available for various sectors

  • Accelerated Depreciation
  • MNRE Subsidy
  • Renewable Energy Certificate
  • Net metering incentive
  • Loan

Incentives for Rooftop Solar Power

Accelerated Depreciation (AD) is applicable as an incentive only for non-residential sectors. If a profit-making company opts for solar, they can claim 40% of the total upfront cost as depreciation. This will decrease the tax payment in the earlier years. Commercial entities making profits can recover most of the project cost in the very first year through AD.

Let us consider a company making a profit of 3 crores. Say, the company invests in a rooftop solar power plant that costs approximately ₹2 crores. 40% of the project cost can be depreciated the very first year i.e., you can reduce the taxable profits by ₹80 lakhs.

MNRE Subsidy is aimed at providing financial assistance up to 30% of the benchmark cost for all types of residential buildings, institutions and social sector in general category states and Union Territories. However, if you are from the northeast or special category states the subsidy can be availed up to 70%. One has to note that the benchmark cost (for 2018-19) varies each year and it is updated by the MNRE every year.

Government buildings, government institutions including the Public Sector Undertaking (PSU), private, commercial and industrial sector cannot avail MNRE subsidy. Instead, they will be provided with achievement-linked awards/ incentives.

Renewable Energy Certificates (RECs) are provided when the unused electricity generated from renewable energy sources such as solar energy is fed back into the power grid. The provider of solar power such as the owner of the solar PV system will then receive REC that can be traded for a financial incentive for every unit of the power generated.

A grid-interactive solar PV system can operate on a Net Metering basis. Under net metering, the beneficiary pays to the local utility purely relying on the net meter reading. However, this is possible only if two meters are employed to record the import and export of solar power separately. For the extra power exported to the grid, the incentive can be of the following two types based on the type of the incentive policy.

  1. Reduction in electricity bill corresponding to the number of units exported
  2. Special tariff for the number of units fed to grid provided by the state government

However, grid-connected systems are eligible for MNRE subsidy with or without net metering/gross metering. This is happy news because anybody can avail MNRE subsidy irrespective of the state government’s net metering policy if their system is grid-interactive.

Unlike MNRE subsidy, loan scheme for financing Grid-connected Rooftop Solar PV System is available to categories as per IREDA norms such as the PSUs, private sector companies/firms, joint sector companies, state utilities etc. The interest rates range from 9.9 – 10.75% and additional interest at 0.50% over and above the applicable rate of interest will be charged till the date of commissioning of the solar project.

As per the Financing Norms and Operational Guidelines of the Rooftop Scheme, the quantum of a loan from IREDA will be 70% of the project cost with a minimum promoter’s contribution of 30%. This loan is likely to be extended up to 75% of the project cost on the basis of various parameters.