Electricity to be more affordable, farmers to save Rs 1,750 crore on solar pumps

With the new GST rate cut coming into play from September 22, the Ministry of New and Renewable Energy on Wednesday highlighted that the rationalization of GST rates across the renewable energy value chain from 12% to 5% will make electricity more affordable.

It mentioned that the new rates will bring down the cost of clean energy projects, making electricity more affordable and directly benefiting households, farmers, industries, and developers.

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For instance, the capital cost of a utility-scale solar project, which typically amounts to around Rs 3.5 to 4 crore per MW, will now see savings of Rs 20 to 25 lakh per MW. At the scale of a 500 MW solar park, this translates into project cost reductions of over Rs 100 crore, significantly improving tariff competitiveness, it said citing an example.

It further noted that the reduction in GST is expected to lower levelised renewable tariffs easing the financial burden of electricity procurement for distribution companies (DISCOMs). This could translate into nationwide annual savings of Rs 2,000–3,000 crore in power procurement costs.

On the rooftop solar systems, it said a typical 3 kW rooftop system will now be cheaper by about Rs 9,000 to 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 with 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.

Lower GST will enhance the competitiveness of Indian-made renewable energy equipment by reducing module and component costs by 3–4%, supporting the Make in India and Aatmanirbhar Bharat initiatives.

With India targeting 100 GW of solar manufacturing capacity by 2030, the reform will encourage fresh investment into domestic manufacturing hubs.

The GST cut will not only reduce the levelized cost of energy but also boost investor confidence, enabling faster signing of power purchase agreements and quicker project commissioning.

Given that India plans to add around 300 GW of renewable energy capacity by 2030, even a modest 2–3% 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 annually; faster deployment enabled by GST rationalisation could therefore avoid an additional 50–70 million tonnes of CO2 emissions per year by 2030.