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					</table>The Himachal Pradesh Electricity Regulatory Commission (<a href="https://hperc.org/" target="_blank" rel="noopener">HPERC</a>) has set the rate for the sale of the state government’s free power to the Himachal Pradesh State Electricity Board (HPSEBL) at ₹2.73 (~$0.0292)/kWh for the financial year (FY) 2026–27, marking an increase from ₹2.70 (~$0.0289)/kWh in FY 2026 and ₹2.60 (~$0.0279)/kWh in FY 2025.
Himachal Pradesh is entitled to a share of electricity generated from hydroelectric projects located within the state as compensation for the use of its natural resources. This free power, typically around 12% of generation, comes from projects owned by central public sector undertakings such as NTPC, NHPC, and SJVN, as well as independent power producers and state entities.
In some cases, the share is higher, such as 20% from the Malana-I project, 16% from Chanju-I, and 15% from projects like Toss, while several small hydro projects also contribute an additional 1% toward the Local Area Development Fund.
The Commission calculated the rate by taking the higher of HPSEBL’s average power purchase cost and the ex-bus tariff of each generating station, and then deriving a weighted average based on the quantum of free power available.
For FY 2027, the average power purchase cost for FY 2026 was estimated at ₹2.66 (~$0.0285)/kWh, and this benchmark, along with station-specific tariffs or alternate values such as power purchase agreement rates or average pooled power purchase cost, was used to compute the final rate.
Based on this approach, the Commission estimated that HPSEBL would have access to approximately 548.23 million units of free power during the year, with a total notional cost of ₹1.49 billion (~$15.98 million). These calculations resulted in the approved rate of ₹2.73 (~$0.0292)/kWh.
In determining station-wise costs, the Commission relied on different benchmarks depending on data availability. For HPSEBL’s own generating stations, ex-bus tariffs determined by the Commission were used. For projects such as Ranjit Sagar Dam and Shanan, tariffs approved by the Punjab State Electricity Regulatory Commission were considered.
For private small hydro projects, approved power purchase agreement tariffs were used, and in cases where specific tariffs were unavailable, the Commission adopted an average pooled power purchase cost of ₹2.72 (~$0.0291)/kWh as a substitute.
Beyond tariff determination, the order contains a significant observation on the allocation of free power. HPSEBL informed the Commission that it is currently utilizing free power only from stations connected to its system and that free power from several other stations has not been made available by the state government.
The Commission expressed concern over this arrangement, stating that HPSEBL should have the first right to the state’s free power. It noted that consumers effectively bear the cost of this power because tariffs for hydro generators are determined after excluding the free power component.
As a result, restricting access to this power could mean that consumers are indirectly paying for it without receiving its benefits. The Commission urged the state government to review its approach and allocate the maximum possible quantum of free power to HPSEBL.
In June last year, Himachal Pradesh <a href="https://www.mercomindia.com/himachal-pradesh-regulator-finalizes-resource-adequacy-framework-regulations/" target="_blank" rel="noopener">finalized</a> its Resource Adequacy Framework Regulations to ensure that the state’s generating companies, distribution licensees, distribution companies and load dispatch centers contract sufficient electricity generation capacity to meet peak demand reliably, cost-effectively, and sustainably.
Subscribe to Mercom’s real-time <a href="https://mercomindia.com/product/mercoms-renewable-energy-regulatory-updates/" target="_blank" rel="noopener">Regulatory Updates</a> to ensure you don’t miss any critical updates from the renewable industry.

HPERC Sets Himachal’s Free Power Rate at ₹2.73 /kWh for FY 2027

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					</table>At a time when the government is pushing for greater adoption of solar through the PM Surya Ghar: Muft Bijli Yojana, which aims to make households energy-independent, free electricity programs have proved to be an impediment to rooftop solar in some states.
When consumers receive up to 300 free units per month in some states, they see little reason to invest in rooftop solar systems.
These programs also put severe financial strain on power distribution companies (DISCOMs), many of which are already struggling with debt.
Parliament&#8217;s Standing Committee on Energy recently <a href="https://www.mercomindia.com/parliament-committee-skeptical-about-mnre-meeting-pm-surya-ghar-target/" target="_blank" rel="noopener">said</a> it will be challenging for the Ministry of New and Renewable Energy to meet the financial year 2026 target of installing 3.5 million rooftop solar systems under the PM Surya Ghar program.
Mercom spoke to multiple stakeholders to assess the impact of free electricity programs on rooftop solar adoption and find an equitable approach to incentivize consumers without burdening the already distressed DISCOMs.
<a href="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/03/free-electricity.png"><img loading="lazy" decoding="async" class="aligncenter wp-image-77669 size-full" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/03/free-electricity.png" alt="free electricity" width="538" height="334" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/03/free-electricity.png 538w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2025/03/free-electricity-300x186.png 300w" sizes="auto, (max-width: 538px) 100vw, 538px" /></a>
Punjab
Punjab, for instance, provides 300 free units of electricity per household. &#8220;While this offers consumers significant financial relief, it has reduced interest in rooftop solar adoption,&#8221; noted one installer.
Rooftop installers are often asked why consumers should invest in solar when they already receive free power. Additionally, those installing solar systems will lose their right to free units, making rooftop solar unattractive.
Another installer noted that Punjab&#8217;s flawed billing system further exacerbates the situation, with frequent errors and unexpected charges causing frustration.
According to the latest figures, Punjab has a billing efficiency of only 89.27%.
&#8220;Consumers often face incorrect electricity bills, where random charges are added without explanation. The lack of proper metering and monitoring means people who install solar often end up with unexpected billing issues,&#8221; the installer noted.
Stakeholders in Punjab welcomed awareness programs to educate consumers about the long-term savings of solar, rather than just focusing on short-term &#8216;free&#8217; benefits.
The installers also pointed out that the government should modify the 300 free unit policy to offer a buyback system instead—allowing people to sell excess solar energy at a fair price. If, instead of free units, the government offered to buy back excess energy at ₹3 (~$0.035) /kWh-4 (~$0.046)/kWh, consumers would be more inclined to install solar systems.
Jharkhand
Jharkhand provides 200 free units of electricity per household. However, installers noted that consumers who stay within this limit see little incentive to invest in solar. Those with higher consumption levels are more likely to adopt solar to offset additional costs. The free units remain applicable even after installing a rooftop solar system under the PM Surya Ghar program, allowing consumers to reduce their electricity bills further.
&#8220;Many consumers in Jharkhand, especially in rural areas, are unaware of government programs like PM Surya Ghar that offer financial support for solar installations. Due to lack of information, many eligible families do not consider solar as an option, even when it could benefit them in the long run,&#8221; one installer noted.
Unlike in urban areas, where people have better access to online resources, rural residents often struggle to navigate application processes for subsidies and loans.
Installers noted that the complicated process, red tape, and online documentation requirements create obstacles when people want to apply for solar subsidies. Many abandon the process or delay installation as they lack the knowledge or resources to move forward.
&#8220;Simplifying the subsidy process and introducing community solar projects could improve adoption rates. Awareness campaigns tailored for rural areas are needed to bridge the knowledge gap and encourage wider participation in solar energy initiatives,&#8221; one installer said.
Jharkhand has one of the <a href="https://www.mercomindia.com/residential-rooftop-solar-ghar-cross-600000" target="_blank" rel="noopener">lowest</a> registration-to-application ratios of 2.35% and an application-to-installation ratio of just 1.15% under PM Surya Ghar.
Delhi
Delhi offers 200 free units of electricity per household. &#8220;Many people in Delhi believe electricity is entirely free, but it&#8217;s only free up to a certain limit. Beyond that, regular charges apply for the entire units consumed. Because of this &#8216;free electricity&#8217; perception, many people hesitate to install solar panels, thinking they won&#8217;t get any additional financial benefit,&#8221; one installer noted.
&#8220;During peak summer, households may consume around 350-400 units, exceeding the free limit. This is when solar can help offset those additional charges,&#8221; another installer said.
A major challenge is that customers assume everything is covered under government programs. They don&#8217;t realize that while subsidies exist, they still need to pay an initial amount, including GST. Most people don&#8217;t calculate long-term savings and focus only on immediate expenses, resulting in a reluctance to invest.
Another common issue is that many rooftops in Delhi are not structurally suited for solar panel installations. Some houses have fragmented rooftops or lack proper reinforced cement concrete surfaces, requiring additional structural work before installation, which adds to the cost. &#8220;Customers hesitate when they realize additional expenses for reinforcement or proper mounting structures may be involved,&#8221; an installer said.
Installers note that even though government-backed solar loans are available for those who cannot afford upfront payments, many customers are unaware of how to apply for them. &#8220;Some people hesitate to take loans, even if the repayment terms are easy, due to a general distrust of financial institutions,&#8221; one installer noted.
Stakeholders pointed out that solar adoption would increase significantly with more awareness about these financing options. Increased awareness campaigns about the long-term benefits of solar energy, including cost savings and environmental impact, can help change perceptions.
Karnataka
Installers in Karnataka had a different take on the idea that free electricity discourages rooftop solar adoption. &#8220;Maybe around 10% of people hesitate due to this, but for 90% of them, the 200 units of free electricity is not a deciding factor. We have not lost any orders because of free electricity programs. Most people are well aware of government incentives, and if they decide to go for solar, they do so regardless of such programs,&#8221; installers said.
In cities like Bengaluru, most people are educated and environmentally conscious. They want to contribute to sustainability, which is a significant motivator for choosing solar energy. Additionally, many opt for rooftop solar because of long-term savings on electricity bills and protection against rising electricity costs.
However, they noted that if the government wants to encourage rooftop solar adoption, providing subsidies on top of existing central subsidies would help.
In Karnataka, if a residential consumer applies for the PM Surya Ghar program and already benefits from the state-provided free electricity of 200 units per month, they become ineligible for the free electricity program.
Karnataka is one of the laggards when it comes to rooftop solar adoption.
Tamil Nadu
&#8220;As of now, there are no regulations stating that the customer&#8217;s name will be removed from the Tamil Nadu free electricity program if they opt for the PM Surya Ghar program. They benefit from both programs and receive a net-metering tariff for the extra power sent to the grid. However, the free electricity program is preventing many people from switching to solar,&#8221; an installer noted.
&#8220;Nowadays, instead of payment, they can adjust the surplus power for the following months. Why should people choose rooftop solar if they already benefit from 100 units of free electricity? This is a common query we are facing,&#8221; said one installer.
Installers in the state want consumers to be aware that the free electricity program is state-based, and it can be reduced to a limited number of units or even removed entirely, but this is not the case with rooftop solar.
&#8220;If you choose rooftop solar under any program, including PM Surya Ghar, the consumer will benefit for up to 25 years as per the agreement signed with DISCOMs for a fixed tariff,&#8221; the installers noted.
Rajasthan
Industry sources in Rajasthan agree that the impact of free power on rooftop solar is largely negative. If consumers get 100 units of free electricity, their need for a 1 kW rooftop solar system is eliminated.
&#8220;The government is not seriously promoting rooftop solar but shifting the burden of free electricity by leveraging subsidy benefits,&#8221; according to Ajay Yadav, President of Rajasthan Renewable Energy Association.
Recently, the Rajasthan government <a href="https://www.mercomindia.com/rajasthan-announces-150-units-of-free-electricity-with-rooftop-solar-projects" target="_blank" rel="noopener">announced</a> 150 units of free monthly electricity for the beneficiaries of the Chief Minister Free Electricity Program. Leveraging PM Surya Ghar, the government has said it will install free rooftop solar systems for the beneficiaries of the state program, which provides 100 units of free electricity. The free units have now been increased to 150. However, no guidelines are in place for implementation.
Yadav noted that instead of increasing free units, the government should provide direct subsidies of ₹20,000 (~$0.012) to ₹40,000 (~$0.012) to encourage consumers to adopt solar.
Free electricity programs have serious financial consequences for DISCOMs, which are heavily in debt. Unpaid or delayed government reimbursements for the loss of revenue from freebies push them into a debt trap, impeding their ability to invest in modernizing infrastructure and improving efficiency.
The conflict between free electricity programs and solar adoption presents a key policy challenge, potentially slowing the uptake of solar under the PM Surya Ghar: Muft Bijli Yojana. Such giveaways can have debilitating impacts on DISCOM finances, sustainability and long-term energy transition goals.

Free Electricity Programs a Disincentive for PM Surya Ghar Rooftop Solar Adoption

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					</table>The Maharashtra cabinet has approved a budget of over ₹100 billion (~$1.2 billion) for the CM&#8217;s Solar Agriculture Feeder Program 2.0.
The program aims to provide a 24-hour reliable electricity supply to agricultural pumps across the state. It will increase solar energy capacity to 16,000 MW, with 9,000 MW allocated to solar projects and 7,000 MW decentralized solar capacity by 2025.
The state government, following the center’s model of financial assistance, will also provide 30% financial assistance for solar power generation capacity from 2024-25 to 2026-27, amounting to ₹100.41 billion (~$11.97 million). This includes ₹62.79 billion (~$748.57 million) for 2025-26 and ₹37.62 billion (~$448.47 million) for 2026-27.
Under this program, various incentives and financial assistance will also be provided for maintenance and improvement of electricity infrastructure, and support to gram panchayats through a revolving fund from 2024-25 to 2028-29.
A total of ₹28.91 billion (~$344.66 million) has been approved for these initiatives, including ₹7.02 billion (~$83.70 million) for the fiscal year 2024-25.
The Chief Minister also launched a free electricity program for farmers. The government will absorb the electricity cost for 4.4 million farmers with agricultural pumps up to 7.5 horsepower. An annual grant of ₹147.61 billion (~$1.76 billion) will be provided for this purpose.
Maharashtra State Electricity Board (<a href="https://www.msebindia.com/en/home/" target="_blank" rel="noopener">MSEB Holding Company</a>)’s subsidiary Solar Agro Power (MSAPL) recently <a href="https://www.mercomindia.com/maharashtra-floats-power-under-kusum">invited</a> bids to procure 49 MW of solar power under Component C of Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) program for feeder-level solarization.
Jammu and Kashmir Energy Development Agency (<a href="https://www.jakeda.in/" target="_blank" rel="noopener">JAKEDA</a>) also <a href="https://www.mercomindia.com/jk-rate-contract-4000-agricultural-pumps" target="_blank" rel="noopener">invited</a> bids to empanel vendors for the rate contract to commission grid-connected solar power projects of 1 kW to 30 kW to solarize 4,000 existing agriculture pumps. It will be commissioned under Component-C of the Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan (PM-KUSUM) Program.

Maharashtra Cabinet Approves ₹100 Billion for Solar Projects

Tamil Nadu has proposed installing 5,000 solar pumps for which 70% subsidy will be provided, according to the state&#8217;s first-ever &#8216;agriculture budget&#8217; recently presented to the Legislative Assembly.
Minister for Agriculture and Farmers&#8217; Welfare M R K Panneerselvam, presenting the &#8216;agriculture budget,&#8217; said that the power demand for &#8216;well irrigation&#8217; was on the rise, and an effective way to address the demand was to use solar-powered pumps.
To facilitate the same, the Chief Minster&#8217;s Solar Powered Pumpsets Program will be implemented, under which 5,000 solar pumps up to 10 horsepower (HP) capacity with 70% subsidy will be installed, with provision for off-grid, standalone solar powered pumping system.
The program will have an outlay of ₹1.14 billion (~$15.37 million) and utilize state and union government funds in 2021-22.
In November last year, the Tamil Nadu Electricity Regulatory Commission (<a href="http://www.tnerc.gov.in/" target="_blank" rel="noopener">TNERC</a>) passed an order <a href="https://mercomindia.com/tamil-nadu-benchmark-tariff-solar-pumps/" target="_blank" rel="noopener">setting</a> a benchmark tariff of ₹2.28 (~$0.031)/kWh to set up 20,000 agricultural solar pumps under component-C of the KUSUM program.
The Commission also approved a ₹1 (~$0.013)/kWh incentive for farmers for exporting surplus energy back into the grid.
In his budget speech, the minister emphasized the importance of irrigation for profitable farming and declared that free electricity would be provided to 2.219 million electric motors used for farming.
He added that the government would pay ₹20,000 (~$270)/pump per annum to the Tamil Nadu Electricity Board (<a href="http://www.tneb.in/" target="_blank" rel="noopener">TNEB</a>) on behalf of the farmers. The government will allocate ₹45.08 billion (~$608 million) to the TNEB.
A subsidy of ₹10,000 (~$134) will be extended to buy new electric motor pumps or replace the old, inefficient electric motor pumps for groundwater irrigation.
The subsidy would be extended to 1,000 farmers who own less than three acres of land with an outlay of ₹10 million (~$134,962).
Tamil Nadu is not favored by developers for the large-scale project development due to excessive power curtailment problems. The state’s DISCOM also had the highest backlog of overdue payments to power generators. The state is way behind meeting its renewable purchasing obligations. Integrating solar with agriculture is an innovative initiative that the state is exploring.
In January this year, the Solar Energy Corporation of India (<a href="https://seci.co.in/" target="_blank" rel="noopener">SECI</a>) <a href="https://mercomindia.com/seci-issues-tender-solar-projects-tamil-nadu/" target="_blank" rel="noopener">released</a> a tender for 50 MW of solar photovoltaic (PV) projects, including a 10 MW agro-PV component in Tamil Nadu. Agro PV projects involve developing solar projects and cultivating crops on the same plot. The projects provide the added benefits of shielding plantations from harsh sunlight and controlling weed growth.

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