Government’s rooftop solar subsidies to boost solar adoption among SMEs
22 April, 2025
Synopsis:
The Indian government offers various subsidies and financial incentives to encourage businesses to adopt solar energy.
Small businesses can benefit from these subsidies, as high electricity costs reduce profitability, and solar panels can reduce energy expenses significantly.
The financial incentives, tax benefits, and net metering system also lower solar installation costs.
Small and Medium Enterprises (SMEs) are recognised as an important part of the Indian economy. Their role in driving the country’s growth, employment, and innovation is significant. However, rising electricity costs are becoming a major challenge for these businesses, directly affecting their profitability and growth.
To stay competitive, SMEs must explore sustainable solutions such as adopting solar energy. The Indian government and financial institutions offer various subsidies, such as a rooftop solar subsidy, SME loan subsidy, MSME electricity subsidy, and incentives to help switch to renewable energy and reduce operational costs. This article provides detailed information on the financial support available to SMEs looking to adopt solar energy and lower electricity expenses.
The energy challenge for Indian SMEs
Many Indian SMEs face high operational costs driven by escalating electricity prices. Power bills account for a significant portion of their expenses, reducing their profitability and making it harder to remain competitive in local and global markets. This energy cost burden becomes especially critical for the manufacturing, textiles, and food processing sectors, where uninterrupted power is essential.
These businesses often face limited growth opportunities and compromised output without affordable and reliable energy solutions. Solar energy presents an attractive alternative, offering a sustainable, cost-effective way to reduce electricity expenses and ensure business continuity. The government’s push for renewable energy adoption provides SMEs with a unique opportunity to take advantage of subsidies, such as rooftop solar subsidy and an MSME electricity subsidy, and support programs that can help them reduce energy costs and invest in long-term growth.
Government initiatives supporting SME energy solutions
The Indian government has launched several initiatives to encourage renewable energy adoption. Programs like the Ministry of New and Renewable Energy (MNRE) subsidy scheme provide financial assistance for installing rooftop solar systems. State governments also offer additional incentives to promote solar energy in industrial groups.
Udyam Registration allows SMEs to access various benefits, including loans at lower interest rates for energy efficiency projects. Additionally, the Credit Linked Capital Subsidy Scheme (CLCSS) offers subsidies for technological upgrades, which include solar installation. These MSME renewable energy incentives aim to reduce the financial burden of switching to renewable energy and help SMEs become more sustainable.
Also Read: A Step-By-Step Guide For Udyam Registration Certificate
Financial incentives for solar adoption
SMEs can access several financial incentives when adopting solar energy. The central government offers a rooftop solar subsidy of up to 40% under the MNRE scheme for systems below 3 kW and 20% for systems between 3 kW and 10 kW. Many states offer net metering benefits for larger installations, allowing SMEs to sell excess power back to the grid.
Apart from direct subsidies, Priority Sector Lending (PSL) allows businesses to access an SME loan subsidy for renewable energy projects. Some banks and financial institutions offer tailored loans for solar installations with flexible repayment options. These incentives significantly reduce the upfront costs of solar energy systems, making it easier for SMEs to switch to clean power.
Steps for SMEs to access financial support
Accessing financial assistance for SME energy solutions involves a few key steps.
Assess energy needs: Determine the current energy consumption and identify how much can be replaced with solar power.
Explore subsidies: Research available government schemes and state-specific SME solar subsidies.
Consult an approved vendor: Interact with an MNRE-approved vendor for reliable installation services and guidance on SME solar subsidy applications.
Apply for financial assistance: Approach banks offering an SME loan subsidy under PSL for renewable energy. Submit required documents, including project reports and financial statements.
Monitor and maintain: Ensure proper solar system maintenance for long-term benefits.
Following these steps can help with electricity cost reduction for small businesses and ensure a smooth transition to solar energy.
Benefits of adopting solar energy for SMEs
Adopting solar energy offers numerous benefits for SMEs apart from reducing electricity costs.
Cost savings: Solar power can reduce electricity bills by up to 60–80%, leading to significant savings in the long run.
Energy independence: Solar energy reduces dependence on grid power, ensuring business continuity even during power outages.
Environmental impact: By shifting to solar energy, SMEs contribute to a cleaner environment and improve their brand’s eco-friendly image.
Government support: Financial incentives and tax benefits reduce the cost of solar panel setup.
Improved competitiveness: Lower operating costs give SMEs an edge in the market, allowing them to reinvest savings into business growth and innovation.
These advantages make solar energy a smart, future-ready investment for Indian SMEs.
Conclusion
Solar energy is a game-changer for Indian SMEs struggling with high electricity costs. With government grants for SME solar projects and a clear adoption plan, switching to solar is easier and more affordable than ever. SMEs accepting this shift can achieve long-term sustainability, reduce costs, and contribute to India’s green energy future.
HDFC Bank offers tailored financing options for SMEs, enabling you to buy equipment, install solar panels, fund working capital, and meet your business expansion needs. Explore HDFC Bank’s financing options today and get the right funding for your SME!
Disclaimer: *Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.
