In a bid to encourage the use of rooftop solar power, the ministry of new and renewable energy (MNRE) has exempted customs and excise duties on materials used in solar rooftop projects of more than 100-KW capacity. The move is expected to cut down the overall cost of power generation through solar rooftop projects. Currently, grid tariff for rooftop solar hovers around Rs 6 per unit. Solar tariff touched a new low last week as the final levelised tariff for a 250 MW solar project in Andhra Pradesh was discovered to be Rs 3.15 per unit.

The development also coincides with the Solar Energy Corporation of India (SECI) extending the bid-submission deadline for 1,000-MW grid-connected rooftop solar scheme for government buildings. SECI has received no bids for tenders for the scheme. An official with knowledge about the SECI bids told FE that all the relevant players in the market were waiting for this step by the government. SECI expects the decision to elicit good response for the tenders.

However, Kameswara Rao, partner at PwC, believes that net benefit from the exemptions would be relatively small as such installations often use government subsidy or viability gap funding (VGF). In the VGF model, a one-time grant is provided to projects that are economically justified but fall short of financial viability.

An MNRE official told FE that the move is aimed towards promoting rooftop solar installations across the country. The development will also aide the domestic solar module manufacturing industry. Developers mostly use imported modules for solar installations as they are 8-10% cheaper than their domestic counterparts. The exemption in duties is expected to bridge the gap between the prices of imported and domestically manufactures solar modules.

Though the country is progressing decently in adding renewable capacity, rooftop installation targets have remained elusive. By 2022, India aims to achieve 40 GW of grid connected solar rooftops. So far, only about 500 MW have been installed and about 3,000 MW has been sanctioned. Apart from the private sector, the railways, airports, hospitals, educational institutions and government buildings have been spotted as potential solar rooftop sites. The MNRE had said that at least 5,900 MW power and annual financial savings of `830 crore can be achieved through rooftop solar projects in government properties.