Cabinet approves ₹75,000-crore ‘free electricity’ solar scheme

The ‘PM-Surya Ghar: Muft Bijli Yojana’ aims to provide 300 units of ‘free electricity’ every month to one crore households through rooftop solar installations

February 29, 2024 05:05 pm | Updated 10:22 pm IST - New Delhi

An official walks past solar panels installed at the Pavagada Solar Park north of Bangalore, India, March 1, 2018.

An official walks past solar panels installed at the Pavagada Solar Park north of Bangalore, India, March 1, 2018. | Photo Credit: AP

The Union Cabinet on Thursday approved a ₹75,021-crore package for the “PM-Surya Ghar: Muft Bijli Yojana” (PM Free Electricity scheme) to promote rooftop solar (RTS) installations in India. The scheme claims to be able to provide 300 units of “free electricity” every month to one crore households. However, details of the scheme officially unveiled on Thursday are unclear on how exactly this would result in free electricity to one crore householders.

Also Read | Centre likely to bear ₹1 lakh-crore bill of PM rooftop solar scheme

The Centre will fund, an accompanying press statement from the Power Ministry says, 60% of the cost for installing for 2 kW (kilowatt) systems and 40% of the cost for systems from 2-3 kW capacity. Systems of higher wattage will not be eligible for Central subsidy. “At current benchmark prices, this will mean ₹30,000 subsidy for 1 kW system, ₹60,000 for 2 kW systems and ₹78,000 for 3 kW systems or higher,” a press statement from the Power Ministry noted. As a next step, households will apply for subsidy through a Central portal and be able to select a suitable vendor for installing rooftop solar system. The national portal will assist the households in their decision-making process by providing relevant information such as appropriate system sizes, benefits calculator, vendor rating, etc.

For the remaining costs, households will be able to “access collateral-free low-interest loan products of around 7% at present for installation of residential RTS systems up to 3 kW,” the release noted. This implies that minus the Central subsidy, the rest of the installation expenses have to be borne by the aspirant consumer.

Editorial | A sunshine initiative: On the government’s rooftop solar panel plan

Power Minister R.K. Singh, had explained the financing of the scheme differently in an interaction with reporters, as reported by The Hindu, on February 3. He had said that public sector units, affiliated to the Power Ministry, would be reaching out to “eligible” households and install the rooftop solar systems for free. The PSU, or its affiliated agency, would be responsible for taking out a loan to finance the component not funded by the Central subsidy. This loan would be repaid to the bank by consumers selling surplus power produced back to the grid.

“Sixty per cent of the cost of installation will be subsidised by the Centre. For the rest, [a Central] Public Sector Unit will take a loan [from a bank] and will repay from the cost of electricity [used by the household] over and above the 300 units. You as a householder pay nothing,” he said in his interaction.

Each public sector unit will be tasked with reaching out to specific States. They would form special purpose vehicles (SPV) with private companies to execute the programme. The solar electrification scheme will rely entirely on solar panels and systems made in India to give a fillip to local manufacturing, Mr. Singh had noted. All these benefits were specific to households which installed systems of less than 3kw capacity.

The Hindu couldn’t get comments from him until press time on Thursday.

The press release on Thursday also added that a “Model Solar Village” will be developed in each district of the country to act as a role model for adoption of RTS in rural areas. Urban Local Bodies and Panchayati Raj Institutions would also benefit from incentives for promoting RTS installations in their areas. The scheme also provided a component for payment security for renewable energy service companies (RESCOs) as well as a fund for innovative projects in RTS.

Finance Minister Nirmala Sitharaman in her recent Budget Speech had first mentioned the scheme to generate up to 300 units of free electricity every month which would translate to benefits of ₹15,000-18,000 annually for households. Prime Minister Narendra Modi had announced the scheme following the consecration ceremony at Ayodhya in January.

Currently, household RTS installations account for only about a quarter of the nearly 12 GW (1 GW is 1,000 megawatt) generated from RTS installations.

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.