NEW DELHI: The government on Wednesday raised the subsidy budget for grid-connected rooftop solar power systems from Rs 600 crore to Rs 5,000 crore with a view to encouraging green power use among large consumers in the government, social and institutional sectors.

The money would be used to provide 30% subsidy for installing rooftop solar power plant in “general category” states and 70% for states in the northeastern and Himalayan states besides Lakshadweep, Andaman & Nicobar Islands.

The money would be provided over the next five years to support creation of a total of 42,000 mw grid-connected rooftop capacity under the National Solar Mission.

The raised funding comes in the backdrop of 26 states having formulated net metering and feed-in tariff policies, which would make such projects attractive for large residential, government, social and institutional buildings, including hospitals and educational institutions.

The need for large initial investment has stifled popularity of rooftop systems among residential and institutional consumers. The increased subsidy is expected to make these attractive.

The subsidy scheme excludes commercial and industrial establishments in the private sector, which have seen traction for rooftop solar power plants due to favourable economics.

These consumers pay commercial tariffs for grid power or operate costly diesel generators, while a rooftop plant can supply power at Rs 6.50. They also get other benefits such as accelerated depreciation, customs duty concessions, excise duty exemptions and tax holiday.

Encouraging the industrial and commercial sector to install such plants without subsidy would create the market, build confidence of consumers and enable the balance capacity to be added through market mode.

Rooftop solar power is an important component in the government’s plan to achieve 175,000 mw renewable energy capacity by 2022. The solar mission is part of the larger strategy for the global discourse on climate change.

The 40,000 mw grid-connected rooftop system is estimated to reduce emission equivalent to 60 million tonnes of CO2 per year and will help to fulfil India’s commitment towards its contribution in mitigating the effect of climate change.