Subsidies, or central financial assistance (CFA), are a key policy tool to increase the uptake of clean energy. Over theyears, various incentives have been given to different renewable energy segments. Indian Infrastructure takes a look at the renewable CFA trends and strategies in the country…
CFA disbursement trends for select renewable energy segments from 2019-20 to 2024-25
Over the past six financial years, from 2019-20 to 2024-25 (till December 2024), the total CFA disbursed across renewable energy projects (solar parks, rooftop solar, PM-KUSUM, central public sector undertakings [CPSUs]), solar off-grid, small hydro, green energy corridors, biomass, waste-to-energy and biogas) has increased steadily, as per Lok Sabha questions (March 2025). With a growth rate of 87.6 per cent, the CFA in 2024-25 (till December 2024) reached Rs 92,212.2 million, up from Rs 11,460.6 million in 2019-20 (Graph 1). Notably, the CFA in the current financial year has approximately doubled from the level in 2023-24 (Rs 48,941 million).
The total CFA disbursed during the past six financial years amounts to Rs 229,746.5 million. The top three beneficiaries have been the rooftop solar segment (Rs 114,726 million), PM-KUSUM (Rs 44,050.5 million) and CPSU projects (Rs 23,306.2 million) (Graph 2). Over this period, the solar segments have received 91.3 per cent of the CFA disbursed, followed by green energy corridors (5.9 per cent), bioenergy segments (1.91 per cent) and small hydro (less than 1 per cent). Rooftop solar received almost 50 per cent of the CFA disbursed, primarily due to increased allocation under the PM Surya Ghar Yojana (Graph 3).
Overall, from 2019-20 to 2024-25 (till December 2024), CFA disbursement has increased 21 times for rooftop solar,
around 12 times for PM-KUSUM, and 77 times for waste-to-energy. Meanwhile, CFA disbursement has consistently fallen for solar off-grid and small hydro during this period. Almost 60 per cent of the total CFA in the past six financial years was disbursed to just three states – Gujarat, Maharashtra and Rajasthan, which received Rs 75,349.9 million, Rs 31,170.8 million and Rs 31,159.5 million respectively (Graph 4).
Apart from CFA for projects, the renewable energy sector has received financial assistance to promote domestic manufacturing of solar photovoltaic (PV) and battery storage with advanced chemistry cells (ACC) through production-linked incentives (PLI). The total outlay for solar PV is Rs 240 billion. However, no money has yet been disbursed to manufacturers. According to the Ministry of New and Renewable Energy (MNRE), the approximate outgo under Tranches I and II is likely to be Rs 45 billion and Rs 140 billion respectively. Meanwhile, the total outlay for PLI on ACC battery storage is Rs 181 billion for a capacity of 50 GWh. A total of 40 GWh in two tranches has been allocated to four PLI beneficiaries, according to a government press release dated March 11, 2025. The PLIs are disbursed after production starts from the manufacturing plants. According to the demand for grants for the Ministry of Heavy Industries (2025-26) for this scheme, the actual allocation in Union Budget 2023-24 was a modest Rs 0.077 billion (only revenue expenditure), while the budget estimate for 2025-26 is Rs 1.55 billion (only revenue expenditure).
Another major trend over the years has been the increase in financial assistance for the green hydrogen sector. The total outlay under the National Green Hydrogen Mission is Rs 197.44 billion. According to the demand for grants for the MNRE (2025-26), actual allocation in Budget 2023-24 was Rs 1 billion, the revised estimate in Budget 2024-25 was Rs 3 billion and the budget estimate for 2025-26 is Rs 6 billion (all amounts are revenue expenditure).
The bioenergy sector receives financial support for the collection of biomass and the development of pipeline infrastructure for the injection of compressed biogas (CBG) into the city gas distribution network. According to the demand for grants for the Ministry of Petroleum and Natural Gas (2025-26), the budget estimates for 2025-26 are Rs 1.5 billion and Rs 2.5 billion for biomass collection and CBG pipelines respectively. Furthermore, the government has sanctioned viability gap funding (VGF) for offshore wind energy projects with a total budget of Rs 74.53 billion. This includes Rs 68.53 billion for 1 GW of offshore wind energy projects and Rs 6 billion for the enhancement of port infrastructure.
Taking the bull by the horns: India aims to reduce electricity freebies with financial support for renewable projects
Despite being a developing economy, India has taken an environmentally responsible stance and has increased incentives for the renewable energy sector while also attempting to reduce fossil fuel subsidies.
In fact, in Union Budget 2025-26, more funds have been 
allocated for the MNRE than the Ministry of Power. The government aims to not only promote sustainable development, but also address some of the legacy issues of electricity freebies for residential and agricultural consumers through financial incentives on renewable energy projects.
The increased CFA for rooftop solar (primarily due to the PM Surya Ghar Yojana) is the central government’s attempt to counter some states’ agenda to provide free electricity up to a certain number of units. The government has been trying to convince these states to use their funds
to subsidise residential rooftop solar plants and reduce consumers’ electricity bills instead. An alternative model involving infrastructure development to subsidise citizens’ bills can be adopted to counter freebies.
The PM-KUSUM scheme, with its growing CFA disbursements over the years, also offers a counter to the policy of providing free and subsidised electricity to farmers. While such policies may be defended to some extent on grounds of ensuring social equity, providing free electricity without a sunset clause not only drains the treasury but also leads to excessive water and electricity consumption, impacting soil health and the power distribution segment.
Such freebies are also often misused for political reasons and vote bank gains. Thus, a change in strategy by providing subsidies to farmers for solar irrigation pumps and ensuring feeder-level solarisation under PM-KUSUM offers an alternative political and policy model that promotes clean energy uptake, leading to a gradual phase-out of direct subsidies.
By providing significant financial incentives for the promotion of renewables, the country is driving sustainable development while solving the legacy issue of freebies.
Sarthak Takyar and Sakshi Bansal
