Introduction
For commercial and industrial buyers, India's renewable energy push has created a concrete opportunity to cut energy costs — but only for those who know which incentives to claim. The government has deployed a wide range of instruments to drive adoption: tax breaks, duty waivers, state-level open access policies, and concessional financing. According to the International Institute for Sustainable Development's Mapping India's Energy Policy 2025 report, clean energy subsidies reached ₹31,967 crore (USD 3.9 billion) in FY 2024 — a 31% year-on-year increase over FY 2023. That growth signals serious policy commitment, and for C&I buyers, it translates directly to lower procurement costs.
This guide breaks down what's available for manufacturers, data centres, IT parks, hotels, and large enterprises — and how to qualify for it.
It covers central government schemes, tax benefits, state-specific open access rules, and compliance obligations across India's 16+ states, so you know exactly where to focus.
TLDR: Key Renewable Energy Incentives in India at a Glance
- Central government offers 100% FDI clearance and full ISTS charge waivers for projects commissioned before June 30, 2025
- Green Energy Corridor funding supports transmission infrastructure for large-scale renewable projects
- Businesses can claim 40% accelerated depreciation and Section 80-IA income tax benefits on qualifying renewable energy assets
- GST reduced to 5% and Basic Customs Duty cut to 20% on solar equipment as of 2025-26
- State incentives vary widely: Andhra Pradesh offers 10-year open access exemptions; Rajasthan levies heavy surcharges — policy due diligence matters
- RPO targets require large power consumers to source 29.91% from renewables in FY 2024-25, rising to 43.33% by 2029-30
Central Government Incentives for Renewable Energy
100% FDI Under the Automatic Route
Foreign capital faces zero entry barriers in India's renewable sector. Under the current Consolidated Foreign Direct Investment (FDI) policy, FDI in the renewable energy sector is permitted up to 100% under the automatic route. This means international investors can deploy capital without prior government approval, reducing entry timelines and enabling faster project financing.
Since this policy took effect, India has attracted billions in foreign investment from global renewable developers and financial institutions — directly benefiting C&I buyers through increased project availability and competitive pricing.
Inter-State Transmission System (ISTS) Charge Waiver
For C&I buyers procuring power via inter-state open access, the ISTS charge waiver is the most critical economic lever. ISTS charges are fees levied for transmitting renewable electricity across state boundaries through the national grid. The Ministry of Power mandates a 100% waiver of ISTS charges for 25 years for solar, wind, hydro pumped storage, and battery energy storage systems commissioned on or before June 30, 2025.
Critical deadline: Projects commissioned after June 30, 2025, face progressively reduced waivers:
| Commissioning Period | ISTS Waiver | Duration |
|---|---|---|
| On or before June 30, 2025 | 100% | 25 years |
| July 1, 2025 – June 30, 2026 | 75% | 25 years |
| July 1, 2026 – June 30, 2027 | 50% | 25 years |
| July 1, 2027 – June 30, 2028 | 25% | 25 years |
| After June 30, 2028 | 0% | N/A |
Why this matters: ISTS charges can add ₹0.50–1.00 per unit to landed power costs. The waiver significantly improves project economics for C&I buyers procuring renewable energy from high-resource states like Rajasthan or Gujarat for consumption in load centres like Maharashtra or Tamil Nadu. Exceptions exist for green hydrogen/ammonia plants (commissioned by December 31, 2030) and offshore wind projects (commissioned by December 31, 2032), which retain the 100% waiver for 25 years.
Ultra Mega Renewable Energy Parks (UMREPs)
Even with favourable transmission economics, land acquisition and grid evacuation remain the two biggest project development bottlenecks. UMREPs address both. The government has developed development-ready renewable energy parks with pre-cleared land and built-in grid connectivity, removing the two most common causes of project delays.
As of December 2025, Solar Parks and UMREPs with an aggregate capacity of 41,234 MW have been planned, with 16,791 MW already commissioned, 10,602 MW under construction, and 13,641 MW under award/tendering. For C&I buyers, this translates to lower PPA tariffs and faster commissioning timelines — developers operating within UMREPs carry lower risk, and those savings flow downstream.
Green Energy Corridor Scheme
The government is building dedicated transmission infrastructure to evacuate renewable power from high-resource states to load centres. The Intra-State Green Energy Corridor Phase-I targets 9,700 circuit kilometres of transmission lines and 22,600 MVA substations across 8 RE-rich states. Phase-II, approved with an estimated project cost of ₹12,031.33 crore, targets 10,753 circuit kilometres and 27,546 MVA of substations across 7 states to evacuate 20 GW of RE power.
This infrastructure improves renewable energy availability and grid stability for businesses across India, enabling reliable long-term PPAs from distant generation sites.
Production Linked Incentive (PLI) Scheme for Solar PV Modules
The PLI scheme aims to build domestic manufacturing capacity for solar equipment. With an outlay of ₹24,000 crore across two tranches, the government has awarded 48,337 MW of fully integrated solar manufacturing capacity. As of June 30, 2025, the scheme has driven installation of 18.5 GW of solar modules, 9.7 GW of solar cells, and 2.2 GW of ingot-wafer capacity.
Indirect benefit for C&I buyers: Increased domestic manufacturing reduces import dependency, stabilises equipment prices, and improves supply chain reliability for project developers, ultimately lowering CAPEX for C&I installations.
Tax and Financial Incentives for Businesses
Accelerated Depreciation (AD) for Renewable Energy Assets
Under Section 32 of the Income Tax Act (Rule 5, Appendix I), renewable energy devices including solar power generating systems and windmills installed on or after April 1, 2014, are eligible for an accelerated depreciation rate of 40%. This allows businesses to depreciate 40% of the asset value in the first year, cutting taxable income in year one.
This incentive applies to the asset owner — making it especially valuable for C&I businesses installing captive systems under CAPEX models. For a ₹10 crore solar installation, a company can claim ₹4 crore depreciation upfront, translating to roughly ₹1 crore in tax savings at a 25% corporate rate.
Section 80-IA Income Tax Holiday
Enterprises set up for generation and distribution of power are eligible for a 100% deduction of net profits for 10 consecutive assessment years out of the first 15 years of operation. This effectively provides a 10-year income tax holiday for qualifying RE projects.
C&I businesses establishing captive power plants and independent power producers (IPPs) can both claim this deduction, subject to minimum project size and operational eligibility criteria.
Beyond direct tax benefits, indirect tax relief on equipment costs has become equally significant for project economics.
GST Treatment of Solar Energy Equipment
Effective September 22, 2025, the government slashed GST on solar power generating systems, solar PV modules (HSN 8541), and solar inverters (HSN 8504) from 12% to 5%. This replaces the older composite supply rule where 70% of an EPC contract was taxed as goods (12%) and 30% as services (18%).
For a ₹10 crore solar installation, this reduction saves approximately ₹70 lakh in upfront capital expenditure, improving project IRRs by 1-2 percentage points.
Concessional Financing Through IREDA, REC Ltd, and PFC
Government-backed financial institutions offer lower-cost debt for renewable energy projects:
| Lender | Borrower Category | Interest Rate |
|---|---|---|
| IREDA | CPSUs/State PSUs (AAA to AA) | 8.45% - 8.65% |
| IREDA | Private Sector (Grade I) | 8.90% |
| PFC | State Sector (Category A++) | 8.95% |
| PFC | Private Sector (Category IR-1) | 9.20% |
Notable terms to factor into project planning:
- PFC offers a 10 basis point rebate for solar projects with 75%+ domestic content
- IREDA requires minimum 30% promoter contribution (70:30 debt-equity ratio)
- Repayment periods extend up to 15 years for highly rated off-takers
Customs Duty and Import Policy for Solar Equipment
In the Union Budget 2025, the Basic Customs Duty (BCD) on imported solar cells and modules was reduced to 20%, down from previous rates of 25% and 40% respectively. This change took effect on February 2, 2025.
The Approved List of Models and Manufacturers (ALMM) runs parallel to this policy: government projects, open access, and net-metering projects must source components from government-approved domestic manufacturers. Projects commissioned on or after June 1, 2026, must use both modules from ALMM List-I and cells from ALMM List-II. Those commissioned before this date are exempt from the cell sourcing requirement.
State-Level Incentives and Open Access Policies
Understanding Open Access
Open access, enshrined in Section 42 of the Electricity Act 2003, allows consumers to procure power from third-party generators, bypassing the DISCOM. For large commercial and industrial consumers, this typically translates to landed power costs 20–35% below DISCOM tariffs, depending on state-level charges. Open access comes in two forms:
- Short-term open access: Power procurement for periods up to one year
- Long-term open access: Power procurement exceeding one year, typically through 10–25 year PPAs
State-Specific Open Access Charges
The economic viability of open access depends entirely on state-level charges levied by State Electricity Regulatory Commissions (SERCs). These charges vary dramatically:
| State | Cross-Subsidy Surcharge | Additional Surcharge | Key Exemptions |
|---|---|---|---|
| Andhra Pradesh | Not applicable (captive RE projects) | Not applicable (captive RE projects) | 10-year full exemption for RE manufacturing; 50% exemption on transmission/wheeling for wind-solar hybrid (5 years from COD) |
| Gujarat | Not applicable (captive projects) | ₹0.82/kWh (Apr–Sep 2025) | No capacity restrictions on RE project sizing vs. contracted demand |
| Rajasthan | ₹2.23/unit (non-domestic, 11 kV); ₹1.67/unit (large industrial, 33 kV) | ₹0.89/kWh | Net metering cap raised to 1 MW for larger industrial consumers |
Andhra Pradesh:The AP Integrated Clean Energy Policy 2024 offers a 10-year exemption on open access charges (transmission, wheeling, and cross-subsidy surcharge) for RE manufacturing projects. For wind-solar hybrid projects, AP provides a 50% exemption on transmission and wheeling charges for 5 years from commercial operation date (COD). Cross-subsidy surcharge and additional surcharge are not applicable for consumption from clean energy projects fulfilling captive generating plant criteria.
Gujarat:The Gujarat Integrated Renewable Energy Policy 2025 removed capacity restrictions for setting up RE projects with respect to a consumer's contracted demand. However, GERC has set the additional surcharge for open access consumers at ₹0.82/kWh for April 2025 to September 2025. Cross-subsidy surcharge and additional surcharge are not applicable to captive power projects.
Rajasthan:Rajasthan levies heavy open access charges. The cross-subsidy surcharge (CSS) for non-domestic service at 11 kV is ₹2.23/unit, and for large industrial service at 33 kV is ₹1.67/unit. The additional surcharge is ₹0.89/kWh. RERC has raised the net metering cap from 500 kW to 1 MW, opening rooftop solar benefits to larger industrial consumers.
Net Metering and Gross Metering Policies
Beyond open access charges, net metering policies determine how much self-generated solar power can offset grid consumption — a critical factor for facilities with predictable daytime loads.
Under the SERC framework, excess generation feeds back to the grid and earns credits that offset future bills. This works best for commercial establishments — warehouses, IT parks, hospitals — where daytime load profiles align with solar generation hours.
State regulations differ significantly on three parameters:
- Capacity limits: Most states allow net metering for commercial consumers up to 500 kW–1 MW
- Banking periods: Settlement cycles range from monthly to annual, affecting cash flow planning
- Settlement mechanisms: Some states pay cash for surplus units; others allow only consumption credits
Renewable Purchase Obligation (RPO): What It Means for Businesses
Understanding RPO
RPOs require obligated entities — distribution companies, open access consumers, and captive power users — to source a mandated percentage of their energy consumption from renewable sources. The Ministry of Power has set aggressive national RPO trajectory targets:
| Financial Year | Wind RPO | Hydro RPO | Other RPO (incl. Solar) | Total RPO |
|---|---|---|---|---|
| 2024-25 | 2.46% | 1.08% | 26.37% | 29.91% |
| 2025-26 | 3.36% | 1.48% | 28.17% | 33.01% |
| 2027-28 | 5.23% | 2.15% | 31.43% | 38.81% |
| 2029-30 | 6.94% | 2.82% | 33.57% | 43.33% |
Any shortfall in the 'Other RPO' category can be met with excess energy consumed from eligible wind or hydro projects. For businesses that cannot install dedicated renewable capacity, RECs offer a flexible compliance route.
Renewable Energy Certificate (REC) Mechanism
RECs allow businesses to meet RPO compliance by purchasing certificates from renewable energy generators. Under the CERC REC Regulations 2022, the floor and forbearance (ceiling) prices for RECs have been eliminated. Prices are now discovered purely through market demand and supply on power exchanges (IEX, PXIL) or via mutual agreement with electricity traders.
RECs are traded on the second and last Wednesday of every month, with CERC reviewing proposals to move to daily continuous matching.
RPO as a Business Driver
When neither direct RE sourcing nor RECs cover the obligation gap, businesses face a hard financial consequence. CERC has set the Renewable Consumption Obligation "buyout price" (penalty) at ₹347/MWh for FY 2024-25 and FY 2025-26. Companies that adopt renewable energy through PPAs or captive projects can meet RPO targets, avoid penalties, and reduce energy costs at the same time.
For a business consuming 10 million units annually with a 30% RPO obligation, non-compliance penalties could exceed ₹1 crore annually — making proactive procurement the more cost-effective path by a wide margin.
How C&I Businesses Can Leverage These Incentives
Two Primary Routes for C&I Renewable Energy Access
Route 1: Captive GenerationSetting up an on-site or group captive solar/wind plant. Benefits include:
- 40% accelerated depreciation in year one
- Section 80-IA tax holiday for qualifying projects
- Exemption from cross-subsidy surcharge (in most states)
- Complete control over generation and consumption
- Typical payback periods of 4-6 years
Route 2: Third-Party Open Access PPASigning a long-term PPA with a renewable developer. Benefits include:
- Zero upfront capital requirement
- ISTS waiver for inter-state projects (if commissioned before June 30, 2025)
- No operational or maintenance responsibilities
- Flexible contract terms (10-25 years)
- Immediate energy cost savings
Key Due Diligence Steps
Before accessing incentives, businesses must verify four critical areas:
- State regulations: Open access rules, surcharges, wheeling charges, and banking facilities vary significantly — Andhra Pradesh offers 10-year exemptions while Rajasthan levies ₹2.23/unit CSS
- DISCOM connectivity timelines: Grid approvals take 3-12 months depending on the state; build this into project planning from day one
- Developer credentials: Confirm track record, financial stability, and project pipeline — particularly whether the developer can meet the June 30, 2025, deadline for 100% ISTS waiver eligibility
- Contract structure: Review PPA tenor, tariff escalation clauses, exit provisions, force majeure terms, and ALMM compliance requirements before signing
Simplifying Procurement with Opten Power
Cross-state policy differences across 16+ states make regulatory accuracy a practical challenge for most C&I buyers. Opten Power's clean energy marketplace addresses this directly — C&I buyers can compare PPA tariffs, projected savings, and IRR across solar, wind, and hybrid projects spanning 16 states from a single platform.
Built-in DISCOM intelligence, automated RFP tools, and pre-approved contract templates cut deal timelines by up to 50%, helping businesses capture available incentives without manually tracking state-by-state regulatory changes.
Frequently Asked Questions
Is there any subsidy for a 500 kW solar system in India?
Commercial and industrial solar systems above 10 kW do not qualify for PM Surya Ghar subsidies, which are limited to residential installations. C&I systems can instead access 40% accelerated depreciation, ISTS waivers, net metering/open access frameworks, and state-level incentives like stamp duty waivers and wheeling charge exemptions.
What are the green tax incentives in India?
India offers Section 80-IA income tax holiday (10-year deduction of net profits for power-generating enterprises), 40% accelerated depreciation on RE assets, and GST concessions (5% on solar equipment). There is no standalone green tax credit equivalent to the US ITC/PTC, but these provisions together deliver meaningful reductions in tax liability and project costs for RE investors.
What is the Renewable Purchase Obligation (RPO) and who does it apply to?
RPO mandates obligated entities — including distribution licensees, open access consumers, and captive power users above a specified consumption threshold — to source a set percentage of their electricity from renewables. The national target is 29.91% for FY 2024-25, rising to 43.33% by 2029-30.
Can commercial and industrial businesses avail of ISTS charge waivers?
Yes. C&I consumers procuring renewable energy through open access from inter-state projects commissioned on or before June 30, 2025, receive 100% ISTS waivers for 25 years. This significantly reduces landed power costs. Projects commissioned after this date receive progressively lower waivers (75%, 50%, 25%, then zero).
What is accelerated depreciation for solar in India?
The Income Tax Act allows businesses that own solar or wind assets to claim 40% depreciation in the first year, directly reducing taxable income. For a ₹10 crore CAPEX installation, this yields approximately ₹1 crore in tax savings at the standard 25% corporate tax rate — making it most valuable for captive project owners.
How do state-level incentives differ from central government incentives for renewable energy?
Central incentives — ISTS waivers, accelerated depreciation, and Section 80-IA — apply uniformly across India. State-level incentives such as wheeling charge reductions, banking facilities, stamp duty waivers, and open access surcharge exemptions are governed by individual State Electricity Regulatory Commissions (SERCs) and vary widely. Andhra Pradesh offers 10-year exemptions, while Rajasthan levies heavy open access surcharges.
