Government policies and regulations for solar energy in India

rooftop solar panels on metal sheet
How are solar energy installations in India regulated? How does this differ across the states in India? Find answers, here.

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(last updated on May 16, 2020)

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Policy infrastructure in the renewable energy sector in India took shape with the foundation of the Commission of Alternate Sources of Energy (CASE) in 1981, in the Department of Science & Technology. It became an independent Department of New Energy Sources (DNES) in 1982 and a full-fledged Ministry in 1992.

Who are the decision-makers in India?

The Ministry of New and Renewable Energy (MNRE) is the nodal Ministry of the Government of India for all matters relating to new and renewable energy. The broad aim of the ministry is to develop and deploy new and renewable energy for supplementing the energy requirements of the country. They provide direct and indirect tax benefits such as sales tax, excise duty exemptions, and custom duty exemptions.

National Solar Mission

Jawaharlal Nehru National Solar Mission (JNNSM) 2010, also known as the Solar Mission, is a part of India’s National Action Plan on Climate Change (NAPCC). There are three phases to the mission: Phase I (2010–12), II (2013–17), and III (2017–22). Under Phase I, the Rooftop PV and Small Scale Generation Programme (RPSSGP) aims to encourage the development of rooftop and ground-mounted solar systems.

The Indian government revised the Solar Mission in 2014. It targets for 100 GW installed capacity of solar electricity by 2022. To reach this ambitious target, the government announced several policies to promote solar energy.

Now, let’s get to know the policies and regulations that directly impact solar energy development.

timeline of solar policies

Electricity Act, 2003

The act provides a framework for the overall growth of the electricity sector in India. It gives provisions for preferential tariff and quotas for opting for renewable energy. Mandatory procurement of renewable energy for distribution licensees and facilitation of grid connectivity were incorporated.

National Electricity Policy, 2005

The policy allows preferential tariffs for power produced from renewable energy sources. It aimed to provide access to electricity to all and increase the minimum per capita availability to 1000 kWh per year by 2012.

Tariff Policy, 2006

It is the mechanism of the Renewable Purchase Obligation (RPO) to fix a minimum percentage of the purchase of energy consumption by the states from renewable energy sources. It also provides a special tariff for solar energy among other renewable energies.

Integrated Energy Policy, 2006

This integrated policy recommended a particular focus on renewable energy development and set specific targets for capacity addition.

National Action Plan on Climate Change (NAPCC), 2008

The Government of India initiated mission mode action plans for sustainable growth under NAPCC to address climate change. Its first mission was to intensify solar energy development. It not only set the RPO at 5% of the total grid’s purchase but also a decade long 1% year-on-year RPO growth.

Generation Based Incentives (GBIs) for Solar

The introduction of GBI was for small grid solar projects below 33 kW. GBIs are for bridging the gap between a base tariff of INR 5.5 and the tariff put in place by the Central Electricity Regulatory Commission (CERC) as a fiscal incentive.

Jawaharlal Nehru National Solar Mission (JNNSM), 2010

Also known as National Solar Mission, JNNSM is one of the eight fundamental National Mission’s which comprise India’s NAPCC. The mission targets 20,000 MW of grid-connected and off-grid solar power capacity by 2022 with 2000 MW as a share of off-grid capacity.

Renewable Energy Certificates (RECs), 2011

RECs is a market-based mechanism. It was introduced to enhance renewable energy capacity. It levels the inter-state divergences of renewable energy generation and the requirement of the obligated entities to meet their RPOs with a differentiated price for solar and non-solar.

Clean Energy Cess, 2010

The Clean Energy Cess was introduced to levy the amount of INR 50 to every tonne coal used in the country. The cess created the National Clean Energy Fund (NCEF) that aims to fund clean energy projects. It provides up to 40 per cent of the total costs of Renewable energy projects through the Indian Renewable Energy Development Agency (IREDA). The cess has now grown to INR 400 per tonne of coal used.

Joint Liability Group (JLG) for off-grid installations

By synthesising business and social potential, a small group of 4–10 local entrepreneurs as JLG help avail loans for non-farming activities that may be applicable for micro-grid installations.

Corporate Social Responsibility (CSR)

CSR was introduced to encourage the private sector participation in the national growth and for meeting social goals. The CSR funds are from by the top 500 companies as 2 per cent of their profits towards off-grid solutions.

[Check out the latest CSR Solar CSR initiatives by companies in India]

Overview of RTPV policies of selected states in India

Source: Various State Governments’ Solar Energy Policies

Availing solar subsidy in Karnataka

The MNRE, Ministry of Power, and the Government of India provide a 30% capital subsidy on solar projects. In Karnataka, loans for solar are available as part of a home loan/home improvement loan. Your solar installer can avail of a loan from IREDA on your behalf, at a concessional interest rate (9.9% to 10.75%).

So does the Indian government support Solar energy?

Yes, it does! Both the Central Government as well as State Nodal Agencies (SNAs) offer multiple subsidy schemes to the people for installing rooftop PV systems. The customer can also sell the excess solar power back to the grid, for which the customer would get a predetermined fare as decided by the local DISCOM. 

Subsidies and other schemes offered by the government enables us to exploit renewable energy. Though the upfront cost of installation of a rooftop solar system is high, it is inexpensive in the long run. There are loans available at lower interest rates that overcome the problem of high upfront payment associated with solar projects. In addition to subsidies, the government also offers Accelerated Depreciation (AD) tax benefits to commercial and industrial customers. Companies can use this to reduce the tax burden in the first couple of years in the project. 

Although the subsidy scheme instills a sense of trust within potential clients, availing the subsidy is quite a task by itself. Getting the subsidy is a complex path that involves several government agencies such as the MNRE, IREDA, and local DISCOM (amongst others), it takes about 6 months to a year for the paperwork to go through. Due to the uncertainty of receiving the subsidies on time, it is better to consider solar using other financing options.

Going solar is a 25-year commitment, and if you are considering it, here are a few important resources for you to make use of.

Detailed guides to going solar for homes, apartments, institutions:

Authentic experiences of people who have gone solar captured into easily watchable videos: Youtube (click here to watch)

A visual campaign on why solar makes sense amongst other stuff that we buy: Instagram (click here to explore)

Original content related to solar, sustainability and more; curated by experts on the Solarify team:

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