A plain-language breakdown of the subsidy scheme and how to calculate it correctly for every proposal.
India’s rooftop solar market has received a major boost from the PM Surya Ghar: Muft Bijli Yojana, a central government scheme designed to encourage residential rooftop solar adoption.
For solar installers, the scheme creates a significant sales opportunity—but it also creates an important responsibility.
Customers want to know one thing before making a decision:
“How much will I actually have to pay after the government subsidy?”
If your sales team calculates this incorrectly, the customer can receive the wrong expectation about project cost, savings, or payback period.
Understanding the subsidy structure should therefore be a standard part of every residential solar proposal.
What Is PM Surya Ghar Yojana?
The PM Surya Ghar: Muft Bijli Yojana was launched by the Government of India to encourage rooftop solar installations in residential households.
The scheme has a total financial outlay of ₹75,021 crore and aims to support rooftop solar installations for one crore households.
One of the most important features for homeowners is the Central Financial Assistance (CFA) provided for eligible residential rooftop solar systems.
The scheme can provide up to ₹78,000 of central subsidy for an eligible residential installation.
For installers, this means the subsidy should not be treated as a marketing discount that can be estimated casually.
It needs to be calculated according to the eligible solar capacity and applicable scheme rules.
How Much Subsidy Can a Customer Get?
For standard residential rooftop solar systems, the central subsidy structure is:
| Solar Capacity | Central Subsidy |
|---|---|
| First 1 kW | ₹30,000 |
| Second 1 kW | ₹30,000 |
| Additional 1 kW | ₹18,000 |
| Above 3 kW | No additional central subsidy |
| Maximum | ₹78,000 |
The official scheme structure provides 60% of the applicable benchmark cost for the first 2 kW and 40% of the benchmark cost for the additional 1 kW, with no additional CFA beyond 3 kW for the residential component.
This produces the commonly used ₹30,000 + ₹30,000 + ₹18,000 = ₹78,000 maximum central subsidy structure.
The Most Important Rule: Subsidy Is Capped at ₹78,000
This is one of the most important points your sales team should understand.
Suppose a customer installs:
5 kW rooftop solar
It does not mean:
5 × ₹30,000 = ₹1,50,000 subsidy.
Instead, the central subsidy remains capped at:
₹78,000
So your proposal should clearly distinguish between:
Total System Cost
minus
Eligible Central Subsidy
equals
Customer’s Estimated Net Cost
For example:
5 kW Solar System
Total Project Cost: ₹X
Eligible Central Subsidy: ₹78,000
Customer Payable: ₹X − ₹78,000
The actual project price will depend on the equipment, installation conditions, vendor pricing, taxes and other applicable costs.
Example 1: 1 kW System
Suppose the proposed system is:
1 kW
Eligible central subsidy:
₹30,000
If the quoted project cost is ₹X:
Net customer cost = ₹X − ₹30,000
Your proposal should show the subsidy as a separate line item rather than simply reducing the system’s advertised price.
Example 2: 2 kW System
For a:
2 kW system
the subsidy calculation is:
- First 1 kW → ₹30,000
- Second 1 kW → ₹30,000
Total subsidy = ₹60,000
So if the project quotation is ₹X:
Net customer cost = ₹X − ₹60,000
Example 3: 3 kW System
For a:
3 kW system
the calculation becomes:
- First 1 kW → ₹30,000
- Second 1 kW → ₹30,000
- Third 1 kW → ₹18,000
Total subsidy = ₹78,000
This is the maximum central subsidy available for the standard residential rooftop solar component.
Example 4: 5 kW System
Now consider a customer who requires:
5 kW
The subsidy does not continue at ₹18,000 per additional kW after 3 kW.
Instead:
Eligible central subsidy = ₹78,000
Therefore:
| Item | Amount |
|---|---|
| System capacity | 5 kW |
| Total project cost | ₹X |
| Central subsidy | ₹78,000 |
| Customer’s estimated net cost | ₹X − ₹78,000 |
This distinction should be visible in every proposal.
Why Installers Should Not Calculate Subsidy From Selling Price
A common mistake is to think:
“The system costs ₹X per kW, so the subsidy should simply be a percentage of our selling price.”
That’s not the correct way to approach the scheme.
The CFA is linked to the scheme’s prescribed structure and benchmark-cost methodology, not simply to whatever price an installer chooses to quote.
The official notification specifies the CFA based on the applicable benchmark cost and eligible capacity.
Therefore, your sales software or proposal calculator should have a separate subsidy calculation module rather than allowing salespeople to manually enter an arbitrary subsidy.
Which Customers Should Installers Focus On?
The scheme is primarily relevant to residential electricity consumers installing eligible grid-connected rooftop solar systems.
The residential system is associated with the consumer’s residential electricity connection and is subject to the scheme’s eligibility and technical requirements.
Installers should therefore verify important customer information before finalising a proposal.
Basic information to collect
- Customer name
- Residential electricity connection details
- DISCOM
- Consumer/account number
- Property location
- Average electricity consumption
- Proposed solar capacity
- Roof availability
- System configuration
- Customer bank details where applicable
- Required documentation
The exact process can vary based on the applicable DISCOM and current portal procedures.
The National Portal Is an Important Part of the Process
PM Surya Ghar is implemented through the national portal, and the subsidy process involves the customer, registered/empanelled vendor and DISCOM.
The broader process generally involves:
Customer registration
↓
Select rooftop solar system/vendor
↓
Application and required approvals
↓
System installation
↓
DISCOM inspection/verification
↓
Metering/agreement requirements
↓
Subsidy/CFA processing
The official guidelines specify that the DISCOM conducts the required inspection and verification after installation, and the CFA is transferred to the eligible beneficiary’s bank account or, where applicable, the loan account.
Installers should therefore avoid promising customers that the subsidy will simply be deducted from the quotation unless the applicable process specifically allows that arrangement.
Don’t Forget the Domestic Content Requirement
Another important consideration for installers is equipment eligibility.
The scheme’s eligibility requirements include a Domestic Content Requirement (DCR) for the solar modules used for installations seeking CFA.
The relevant scheme documentation specifies that eligible modules must meet the applicable domestic manufacturing requirements for modules and cells.
This means your procurement team should not select modules purely on price.
Before installing a system under the scheme, verify that the selected equipment meets the current eligibility requirements.
For installers, this means:
Sales team → Technical team → Procurement team
should all be working from the same eligibility checklist.
A low-cost component that doesn’t satisfy the applicable scheme requirements can create serious problems later.
Don’t Confuse System Size With Inverter Size
Another technical detail worth highlighting is that CFA eligibility is tied to the eligible DC capacity of the module system, rather than simply looking at the inverter’s rated capacity.
The scheme documentation specifically addresses situations where the inverter capacity and module capacity differ.
This is important when preparing proposals.
Your software should therefore store at least:
- Module/DC capacity
- Inverter capacity
- Eligible subsidy capacity
- Total system capacity
rather than using one generic “system size” field for everything.
How Installers Should Show Subsidy in a Proposal
A professional proposal should make the calculation transparent.
For example:
Recommended Solar System
System Capacity: 3 kW
Estimated Project Cost: ₹X
Eligible Central Subsidy: ₹78,000
Estimated Customer Contribution: ₹X − ₹78,000
Estimated Annual Generation: X kWh
Estimated Annual Savings: ₹X
Estimated Payback: X years
This is much clearer than simply advertising:
“3 kW Solar at ₹X after subsidy.”
The customer should be able to understand exactly where the subsidy comes from and how it affects the project cost.
A Simple Subsidy Calculator for Your Sales Team
Your CRM, spreadsheet, or proposal software can use a simple capacity-based logic.
If capacity ≤ 1 kW:
Subsidy = ₹30,000 × capacity
If capacity is between 1 and 2 kW:
Subsidy = ₹30,000 + ₹30,000 × additional capacity
If capacity is between 2 and 3 kW:
Subsidy = ₹60,000 + ₹18,000 × additional capacity
If capacity > 3 kW:
Subsidy = ₹78,000
For example:
| System | Subsidy |
|---|---|
| 1 kW | ₹30,000 |
| 1.5 kW | ₹45,000 |
| 2 kW | ₹60,000 |
| 2.5 kW | ₹69,000 |
| 3 kW | ₹78,000 |
| 4 kW | ₹78,000 |
| 5 kW | ₹78,000 |
| 10 kW | ₹78,000 |
Important: This table illustrates the central CFA structure. Actual eligibility, benchmark-cost treatment, application requirements and state/DISCOM procedures should be checked against the current official scheme rules before issuing a final customer commitment.
Don’t Promise “Free Electricity”
The name PM Surya Ghar: Muft Bijli Yojana can sometimes create unrealistic expectations.
Installers should explain the scheme carefully.
Solar generation can substantially reduce a household’s electricity bill, but the actual bill depends on factors such as:
- Solar system size
- Electricity consumption
- Solar generation
- Net-metering or applicable metering arrangement
- DISCOM regulations
- Fixed charges
- Electricity tariff
- Seasonal consumption
- System performance
Therefore, avoid promising that every customer will automatically receive a zero electricity bill.
Instead, provide a realistic generation and savings estimate.
How Installers Can Improve Their Sales Process
The subsidy can actually become a powerful sales tool when presented correctly.
Instead of telling the customer:
“You can get ₹78,000 subsidy.”
Show them the complete financial picture.
Example
Current electricity expense
₹X/month
↓
Recommended solar system
3 kW
↓
Estimated project cost
₹X
↓
Central subsidy
₹78,000
↓
Estimated net project cost
₹X
↓
Estimated annual generation
X kWh
↓
Estimated annual savings
₹X
↓
Estimated payback
X years
This turns the subsidy from a marketing statement into a transparent financial calculation.
Common Mistakes Installers Should Avoid
1. Promising subsidy before checking eligibility
Not every solar installation automatically qualifies.
2. Offering more than the maximum central subsidy
For standard residential installations, the central subsidy is capped at ₹78,000.
3. Using non-compliant equipment
Equipment should meet the applicable technical and scheme requirements.
4. Ignoring DISCOM requirements
The installation, inspection, metering and documentation process can involve the relevant DISCOM.
5. Showing only the “after subsidy” price
Always show the original project cost and subsidy separately.
6. Promising a zero electricity bill
Solar savings depend on actual generation, consumption and applicable electricity/metering rules.
7. Treating state incentives as central subsidy
Where additional state-level incentives or policies apply, keep them separately identified from the central CFA.
Build Your Proposal Around Three Numbers
For a residential solar customer, your proposal should make three numbers immediately visible:
1. Total Project Cost
What the complete system and installation will cost.
2. Eligible Subsidy
The applicable central CFA, subject to scheme eligibility and verification.
3. Customer’s Net Investment
The amount the customer is expected to bear after accounting for the eligible subsidy.
Then add the fourth number that customers care about most:
4. Expected Savings
How much the solar system could realistically reduce their electricity expenditure.
This makes your proposal easier to understand and reduces confusion during the sales process.
Final Thoughts
PM Surya Ghar: Muft Bijli Yojana is a major opportunity for India’s residential rooftop solar industry.
For installers, however, success isn’t just about selling more systems.
It is about calculating correctly, explaining clearly and installing according to the applicable scheme requirements.
Remember the basic central subsidy structure:
₹30,000/kW for the first 2 kW + ₹18,000 for the additional 1 kW, with the standard residential central subsidy capped at ₹78,000.
But don’t stop at the calculation.
A good installer should also verify customer eligibility, use compliant equipment, follow the portal and DISCOM process, and present the subsidy transparently in every proposal.
When your sales team gets these details right, customers get a clearer financial picture—and your business builds greater trust at the same time.
For the latest eligibility requirements, operational rules and amendments, installers should always refer to the current MNRE and PM Surya Ghar portal documentation rather than relying solely on older marketing material.
