With the Cabinet clearing the PM Surya Ghar Muft Bijlee Yojana last week, more details are now available on the scheme announced in January by Prime Minister Narendra Modi. As the name suggests, the scheme is so designed as to reduce to zero not just the electricity bill for the consumer but also the capital cost of setting up a rooftop solar plant. The cost to the exchequer of providing a capital subsidy to an estimated one crore households (this number could increase) which consume electricity up to or below 300 units a month has been pegged at a little over ₹75,000 crore.

A back-of-the-envelope calculation implies an installation of at least 25GW of household rooftop solar, whose current capacity stands at just 2.7GW. Though total rooftop solar installation is at 11 GW, most of it is institution-driven. Meanwhile, utility solar capacity stands at 65 GW. Given that there are about 25 crore households in the country, and that India’s per capita electricity consumption stands at a little over 100 units a month (implying about 400 units per household), the demand for this free electricity scheme could pick up, raising questions about whether the capital subsidy of 60 per cent can be sustained.

As for the salient features of the scheme, a subsidy of 60 per cent of the cost of an installation will be met up to a level of 2 kW, whereas an additional kW will attract a 40 per cent subsidy. As the government press statement explains, this translates into a subsidy of ₹30,000 for a one kW system, ₹60,000 for a 2 kW one and ₹78,000 for a system (less than 60 per cent of the panel cost) that is 3 kW or more. The subsidy tapers off after 2 kW, because a 2 kW panel is expected to generate about 240 units a month, and a 3 kW one over 300 units. The scheme is, in fact, free — the consumer will likely not pay for the remaining 40 per cent if her installation is 2 kw or less. As reported by this newspaper, power generating PSUs may set up special purpose vehicles which will install the systems and recover the remaining cost by netting off the surplus power generated by these systems against the loan taken by them for installation. Right now, the consumer pays up to 70 per cent of the panel cost — which has acted as a drag on rooftop solar offtake.

The scheme is expected to wean away consumers from ‘stolen’ power, adding to the savings of the Discoms. The issue of whether energy savings will accrue depends on a couple of factors. Evening use should not be overly subsidised by net metering set-offs. The co-existence of this scheme with State free power plans needs to be studied. An incentive for battery storage could have been thrown in, helping the industry concerned with a demand stimulus. Community solar options too can be incentivised, where a number of households can create a larger facility and realise economies of scale. But there is no denying that the scheme is good for a start; it can be improved upon and scaled up based on experience.