States turn to solar subsidies to offset losses from subsidised power

To reduce the revenue losses incurred from subsidising electricity, several states, including Uttar Pradesh, Andhra Pradesh and Bihar, are providing financial assistance to households that cannot afford rooftop solar installations., J.V.N. Subramanyam, Joint Secretary at the Union New and Renewable Ministry told The Hindu.

The ₹75,000 crore Pradhan Mantri – Surya Ghar: Muft Bijli Yojna, expects to install rooftop solar (RTS) in one crore households by March 2027. Households are incentivised to do so by offering subsidised installations, bank loans as well as easing the multiple steps the process usually involves.

The scheme currently allots 300 units of “free” power a month to those who install. It emerged, however, that there were households, who had no incentive to install RTS, because they were already getting free power under state schemes.

Rather than continue bearing the recurring costs of providing free daytime electricity, some states are opting, under the Utility-Led Aggregation Model (ULA), to incur a one-time capital expenditure to install RTS.“The approach herein (that is, with the utility-linked aggregation model) entails that additional subsidy [from the states] is modulated as a one-time capital expenditure for installing rooftop solar [setup],” he said.

Currently only those households with a suitable rooftop and are connected to the grid can avail RTS. The scheme doesn’t subsidise storage batteries.

As on August 13, 52 lakh households have installed Surya Ghar RTS. Mr. Subramanyam said that about 2 lakh installations of the stipulated target of 30 lakh installations under the ULA component of the ministry’s PM Surya Ghar have been completed in the ongoing phase.

“Installations have picked up in the last three-four months. There is an uptick and interest from several states including Bihar, Jammu and Kashmir and Rajasthan.,” he said.

A survey by the think tank, Council on Energy Environment and Water (CEEW) in June on adoption patterns under Surya Ghar said that to reach the 10 million mark by March 2027, India needs to sustain its current momentum to solarise 0.6 million households per month between June 2026 to March 2027. “At the same time, there can be an increased effort to diversify the adoption beyond the five states-Gujarat, Maharashtra, Rajasthan, Uttar Pradesh and Kerala, accounting for more than 71 % of national installed capacity,” the report noted.

The survey found that 73% of households that perceive RTS as expensive were unaware of available financing options. Among those who were willing to consider the model, households with low electricity consumption were reportedly the most reluctant to contribute to the upfront cost of installing RTS.

Addressing the affordability barriers faced by households that are aware of RTS but are not interested in adopting it, through suitable financing options, could unlock a theoretical convertible demand of 22.7 GW, according to the report .