Solar Subsidy – A Detailed Process Of Getting Loan From NABARD

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India is the world’s third largest producer of electricity, yet it is ironic how the major part of Indian villages and even urban areas face an acute shortage of electricity. There are a number of cities, towns, and villages that do not receive ample amount of electricity and hence an alternative source of electricity is exploited by Indian consumers.

In this case, solar energy is a top contender among the alternative renewable resource. In fact, to promote solar energy in India, the Government started various solar energy schemes to provoke people to choose this alternative source. The objective of the majority of schemes is to support domestic production of solar energy and supply critical products to achieve that goal.

As apart of these missions government has initiated subsidy schemes to help individuals and organizations procure solar energy systems at reduced capital cost.  The scheme is being implemented by IREDA (Indian Renewable Energy Development Agency Ltd.) through NABARD (National Bank for Agriculture and Rural Development).

What are Solar Energy Subsidies?  

Energy subsidies are measures that keep prices for consumers below market levels or for producers above market levels or reduce costs for consumers and producers. Energy subsidies may be direct cash transfers to producers, consumers, or related bodies, as well as indirect support mechanisms, such as tax exemptions and rebates, price controls, trade restrictions, and limits on market access. They may also include energy conservation subsidies. The development of today’s major modern energy industries has all relied on substantial subsidy support.

Benefits of Energy Subsidies

  • Security of Supply: Subsidies are used to ensure adequate domestic supply by supporting alternative energy production to reduce dependence on fossil fuels and overseas deals with national energy companies.
  • Environmental impact: Subsidies are used to promote solar energy resources and decrease the impact of fossil fuel on the environment and fulfill international obligations.
  • Economic benefits: Subsidies in the form of reduced prices helps to develop a particular sector or segments of the population. Eg – Increasing access to electricity can help alleviate poverty in developing countries like India.
  • Employment: Subsidies are used to maintain employment, especially during the economic crisis.
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National Bank for Agriculture and Rural Development (NABARD)

NABARD is an apex development financial institutions of India. Headquartered in Mumbai, the regional offices are scattered all over India. The bank concerns itself with policies, planning, and operations in the field of agriculture and other important sectors in Rural India.

Procedure to Get Solar Subsidy on Solar panels Through NABARD in India

The step mentioned below outlines the procedure of purchasing a solar panel system and also obtain a solar subsidy from NABARD.

  • The first step is to contact a reliable solar panel dealer/manufacturer from whom you would like to purchase a solar panel system. Your dealer must be authorized under MNRE (Ministry of New and Renewable Energy).
  • But only the models approved by MNRE are eligible to be covered under the scheme. The list mentioned below depicts the models approved by MNRE:
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Image Source: NABARD

  • The benchmark cost of solar panel system is Rs.270 Wp as per NABARD’s document. But the costs change from time to time, and your dealer must be aware of these prices and should guide you during the process.
  • 40% of the cost is subsidized and the rest must be paid by the consumer and is also eligible for a soft loan. However, the margin to be paid by the beneficiary is decided by RBI norms. The repayment period for the loan is 5 years. The interest rates to be paid are also decided by RBI norms.
  • In case the benchmark cost is more than the unit cost, you receive all 40% of the subsidy. But if the benchmark cost is less than the unit cost, then you receive the maximum ceiling cost as mentioned in the table above.
  • Only individuals, a group of individuals, Non-profit organizations and farmer’s group are eligible for subsidy under NABARD bank. Public/Private sector are not eligible for this loan.
  • To avail the loan and subsidy process, you need to have a bank account with a scheduled commercial bank or a regional rural bank. Most public national bank is eligible for this subsidy.
  • To obtain loan and subsidy, you need to submit the quotations and documents available from the dealer. The dealer should provide MNRE approval form, TIn number, project proposals and some other legal documents verifying their business.
  • After document submission and loan approval the process is run through NABARD for subsidy approval. The rate of interest starts as soon as the loan is processed. Though NABARD takes some time to process the subsidy and according to MNRE, should not be subjected to EMI’s.
  • The bankers own the rights to recall the amount if they see some discrepancy in the usage of subsidy.

How Much Solar Subsidy is Available?

According to the latest reports of MNRE. 30% to 90% subsidy is available for all the consumers in India.

  • 90% on solar pumps for farmers only
  • 70% for 3 hill states – Himachal Pradesh, Uttarakhand, Jammu, and Kashmir
  • 30%-40% in all states of India

Who Can Get Subsidy on Solar Panels in India?

All the following consumers can get a Govt. Subsidy through MNRE projects:

  • Domestic: All residential owners are eligible to receive a subsidy from Govt.
  • Social Sector: All registered bodies, societies, multi-story buildings, co-operative group housing societies are eligible to receive subsidies.
  • Institutions: All school, colleges, and similar institutions are eligible for a subsidy
  • Non-Profit Organizations: NGO’s including orphanage, old age homes, homes for disabled etc are eligible for loans and subsidies.

Return on Investment – ROI of Solar Panels

Residential and commercial solar residents who spent 1500/- monthly should consider installing a grid-tied solar panel to save their net metering benefits by at least 20% – 30%.

An approximate estimate is given below:

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Image Source: NABARD

Frequently Asked Questions – Grid Connected Rooftop Solar

What is a Rooftop Solar System

In a rooftop solar panel system, the solar panels are installed on a residential building, commercial complex or an institution. There are generally two types:

  • Grid-Connected Solar Panel system
  • Rooftop solar panels with a storage facility

How much area is required for a 1kW of a solar panel system

A 1kW rooftop system generally requires 12 sq.meteres (130 square feet) of flat shadow-free area. The actual size depends on the size of the roof and whether the condition and efficiency of the solar panel.

How much area is required for a 1kW of a solar panel system

The average cost of grid-connected rooftop solar systems is about Rs. 75 per watt.

What is Net metering?

Net metering is a billing mechanism that credits a value to the electricity produced by the solar panel owners and transfers it to the grid.  Alternatively, two meters can be added separately to measure the input and output of the energy.

What is Feed in Tariff?

The feed-in-Tariff is the tariff the government offers for purchase of solar power generated from such plants.

What are the Requirements from the State to promote rooftop solar panels?

  • States should have a well-designed policy to promote grid-ties solar panel system.
  • The state should regulate appropriate tariff, net metering feed-in tariff, and grid connectivity.
  • The distribution companies should allow distributing electricity through feed-in tariffs and net metering policies.

What are the Different Models of Implementation of Rooftop Solar Panels?

  • CAPEX Model: Here the entire rooftop solar system is owned by rooftop owner. The operation and maintenance for the system lifetime is also the responsibility of the owner. The dealer must install the solar panels is responsible for the first two years of operation and maintenance.
  • RESCO Model: Here the entire system is owned by the developer. The operation and maintenance responsibility is also with the developer. The rooftop owner may consume electricity for which they have to pay a pre-defined tariff on a monthly basis. Excess generation may be exported to the grid, subject to availability of requisite state regulations.

What efforts is Government taking to Push Solar energy Power?

Government of India and the department of financial service have encouraged all nationalized banks to provide a home loan/home improvement loan to install a rooftop solar panel and include the cost of the system in the home loan proposals. So far, nine PSBs namely Bank of India, Syndicate Bank, State Bank of India, Dena Bank, Central Bank of India, Punjab National Bank, Allahabad Bank, Indian Bank and Indian Overseas Bank have given instructions to extend the loan for Grid Interactive Rooftop Solar PV Plants as home loan/ home improvement loan.

Conclusion

Keeping in mind the cost of installation of solar panels, the main objective of the mission is to promote the installation of rooftop solars on residential and commercial buildings. The Indian Renewable Energy Development Agency Limited (IREDA) is responsible for implementing the scheme with the help of NABARD. After the modification of the scheme on 15th March 2012, it has been declared that 40% subsidy will be provided on capital costs of solar PV systems for units which are located in both urban and rural areas of India.