New Delhi: The rationalization of GST rates across the renewable energy value chain from 12 pc to 5 pc will bring down the cost of clean energy products, making electricity more affordable and directly benefiting households, farmers, industries, and developers, said the official statement.
The official statement said, “The capital cost of a utility-scale solar project, which typically amounts to around Rs 3.5-4 crore per MW, will now see the savings of Rs 20-25 lakh per MW. At the scale of a 500MW solar park, this translates into project cost reductions of Rs 100 crore, significantly improving tariff competitiveness.”
The reform is expected to lower the levelised tariffs of solar and other renewable projects, easing the financial burden of electricity procurement for distribution companies (DISCOMs) and unlocking annual savings of Rs 2,000-3,000 crore nationwide, said an official document.
‘DISCOMs or Distribution Companies’ refer to entities in the electricity supply chain that purchase power from generators and distribute it to end-consumers like households or businesses.
The reform will make rooftop solar systems more affordable for households. A typical 3 kW rooftop system will now be cheaper by about Rs 9,000-10,500, making it easier for lakhs of families to adopt solar energy and accelerating large-scale uptake under the PM Surya Ghar: Muft Bijli Yojana.
Farmers under the PM-KUSUM scheme will also benefit significantly. A 5 HP solar pump, costing about Rs 2.5 lakh, will now be cheaper by nearly Rs 17,500. At the scale of 10 lakh solar pumps, farmers collectively stand to save Rs 1,750 crore, making irrigation more affordable and sustainable.
Rural and underserved regions will also gain from cheaper decentralized solutions such as mini-grids, livelihood applications, and solar water pumps. The shorter payback periods and improved returns will empower schools, health centres, and small businesses with clean and reliable energy access.
The lower GST will enhance the competitiveness of Indian-made renewable energy equipment by reducing module and component costs by 3-4pc, supporting the Make in India and Aatmanirbhar Bharat initiatives.
“With India targeting 100GW of solar manufacturing capacity by 2030, the reform will encourage fresh investments into domestic manufacturing hubs. Considering that every GW of manufacturing creates about 5,000 jobs the reform could support 5-7 lakh direct and indirect jobs over the next decade, strengthening India’s clean energy industrial ecosystem.” official statement said.
Given that India plans to add around 300GW of renewable energy capacity by 2030, even a modest 2-3pc cost reduction can free up Rs 1-1.5 lakh crore in investment capacity. Each GW of solar saves about 1.3 million tonnes of CO2 annualy; faster deployment enabled GST rationalisation could therefore avoid an additional 50-70 million tonnes of CO2 emissions per year by 2030, said the official statement.
