In a far reaching decision, the subsidy for setting up roof top solar will be completely removed for the Commercial and Industrial consumers going forward pending the Cabinet’s decision. The decision also clearly points towards the maturity of solar technology and its increasing affordability on its own for the widespread implementation.

Proposal by MNRE for Rooftop Solar Subsidy

MNRE proposes to provide subsidy equivalent to 15% of the Capital Expenditure for the roof top solar solution at the benchmark cost of Rs 75,000 per kW. As such the maximum subsidy available to the consumers will reduce to Rs 11,250 per KW.

The subsidy will be provided through State Nodal Agencies and would be limited to about 4,500 MW of roof top solar installation in the country. However, this subsidy will be available to the Domestic or Residential consumers only and will not be provided to the Industrial and Commercial consumers. The final decision on this matter is expected to be announced in a next couple of months.

Benefit of Accelerated Depreciation

The cost of generation from the roof top solar solutions is reaching the grid parity already. With the benefit of Accelerated Depreciation (AD) of 80% in the first year itself, the Industrial and Commercial consumers have already a huge benefit available. Due to AD, these consumers are able to get an upfront rebate of almost Rs 20,000 per KW at the new benchmark cost of Rs 75,000 per KW which is equivalent to ~27% of the cost solar solution.

Therefore it is being felt that the Industrial and Commercial consumers do not require any further subsidies. In fact, today the pay back for the roof top solar solutions is somewhere between 3-5 years for the most consumers depending on the solar radiation and applicable Discom tariffs.

The subsidy may continue for the Domestic or the Residential consumers for another year. The attractiveness of the roof top solar for this category is considered to be less. However, the roof top solar has become affordable for Domestic consumers also after the implementation of Net Metering facility by the Discoms. A number of other steps including providing the financing under House Loan schemes has been taken up by the government.