Delay in disbursal of solar subsidies in Chennai affects consumers and developers

Multi-year delay in disbursal of subsidies for rooftop solar in Chennai has put off developers and consumers from embracing solar energy.

Chennai’s potential in terms of harnessing rooftop solar energy is widely spoken about. The city has a rooftop solar potential of 1.38 GW, according to an April 2018 study by Greenpeace India. The domestic or residential segment by itself can account for a capacity of about 586.46MW which is 42.6% of the city’s solar energy potential. 

While the picture seems promising on paper, Chennai is nowhere close to making use of the potential of rooftop solar energy in the residential segment for various reasons.

In part 1 of the series, we brought to light how realtors in Chennai are flouting building rules by renting out solar panels rather than permanently installing them. This practice is in violation of the Tamil Nadu Combined Development and Building Rules, 2019 which mandates a permanent installation of rooftop solar to avail building completion certificates. 

There are also other pressing issues that hold back the scaling up of residential rooftop solar in Chennai. According to developers and consumers of solar energy, business is lacklustre due to a delay in disbursement of subsidies, affecting both parties alike.  

Long wait for solar subsidy

For the past eight years, Jagadeesh (name changed), a certified solar developer and an empanelled installer, has been visiting the Tamil Nadu Energy Development Agency (TEDA) office with hopes of receiving his outstanding dues of Rs 60 lakh. He is trying to push the request through TEDA, the state’s nodal agency for renewable energy, that releases the subsidy of various projects to the empanelled installers or developers. 

Developers were eligible for a 30% subsidy in the grid connected rooftop solar scheme, Phase I issued by the Ministry of New and Renewable Energy (MNRE) under the National Solar Mission. Started in 2014, the programme aims to promote grid connected Solar PhotoVoltaic (SPV) rooftop and small SPV power generating plants among the residential, community, institutional, industrial and commercial establishments. A government order accessed by this reporter spells out the scope, funding pattern, implementation arrangements and the role of nodal agencies in the programme. 

Read more: How Chennai realtors are flouting building rules by hiring rooftop solar panels

Customers who want to benefit from solar subsidies reach out to the empanelled installers of TEDA for solar installations. Once the order is confirmed, TEDA makes an entry with the MNRE detailing the client and the project. The project commences after the approval from MNRE. 

Once the installer submits the project completion report to the TEDA, an engineer inspects and gives an approval, which is later sent to MNRE. Installer gets the subsidy once the subsidy amount is released by MNRE. 

In most cases, installers quote the price to consumers reducing the subsidy amount and hence bear the brunt of fund disbursement delays from MNRE. The delay in receiving funds often reduces their working capital, prompting the installers to press for the full payment from customers with the promise to return a portion once the subsidy is received. 

Aware of the delay in receiving subsidies, middle class consumers who cannot afford to wait for months or years to receive the amount, are keeping their plans to go solar on hold. 

“Consumers belonging to the upper middle class opt for rooftop solar even without expecting the subsidy amount. However, the middle class that benefits highly from the rooftop solar is backing out as they cannot afford it with a delayed subsidy,” says Jagadeesh. 

Developers and TEDA disagree on reasons for delay

“I completed grid-connected rooftop solar projects under the 5MW scheme seven years ago. Now, the government has launched Phase II of the same scheme, but I am yet to receive my dues of over Rs 60 lakh from Phase I”, said Jagadeesh.  

chennai solar subsidy scheme TEDA
Phase II of the scheme has been launched even as dues remain unpaid from Phase I. Pic: TEDA

Another Chennai-based developer admitted to not having received subsidy for the same scheme but said, “I don’t want to complain about it as I am afraid I will not  receive the money from TEDA”. 

It is the MNRE that releases the subsidy amount for various projects to the state energy development agencies. While TEDA told developers that they haven’t received the subsidy amount from MNRE, they have another version for the media. 

A TEDA officer, seeking anonymity, said that the developers who haven’t submitted the invoices and project completion reports were the ones who have not been reimbursed. 

Developers however refute this claim. Those who installed panels under the grid-connected rooftop solar scheme are desperately hoping they get their dues. “Why would we not submit the project completion report when we know we won’t get the money otherwise? We made many representations to senior officials at TEDA and MNRE, but they were futile,” a member of the Tamil Nadu Solar Energy Development Association said. 

“A total of Rs 2.4 crore from the scheme is yet to be disbursed to developers in Tamil Nadu,” the member said. 

“It is a central government scheme and MNRE should release the funds. In the latest representation, we were told that the funds will be disbursed in three months,” said an official from TEDA in February 2022. The dues remain uncredited when last checked by this reported in the third week of May 2022. 

A problem across many schemes

The dues of various central and state government schemes are often paid too late.  Developers who have completed projects under the Chief Minister’s Solar Rooftop Capital Incentive Scheme (CIS), are yet to receive the subsidy dues too. 

The CIS, launched in 2013, set a target of 10,000 rooftop solar plants and under the scheme, domestic rooftop consumers can avail a subsidy of Rs 20,000 subsidy for a KW (for the first one KW only) apart from the 30% subsidy provided by MNRE. 

For example, if the installer takes up a 2KW solar project, he/she will get  Rs 20,000 subsidy for the first kilowatt from the state government and 30% of the MNRE’s benchmark subsidy (30% of Rs 80,000 – 24,000) for 2KW. Rs 80000 is the MNRE benchmark cost for 1KW so the 30% subsidy for 2KW will be 48000. 

The installer, thus gets the total of Rs 68,000 (CIS and MNRE subsidy) as the subsidy after the completion of the project. 

“TEDA is still paying developers who undertook projects under the CIS scheme. Even today, the agency owes an approximate Rs 4 crore to developers in Tamil Nadu under the CIS project,” said a developer, who is yet to receive the subsidy amount from TEDA.

Loss of trade for Chennai’s solar developers

It is this  attitude of TEDA and MNRE that is pushing developers to the brink. Developers such as Jagadeesh are quitting the profession altogether or reducing the scale of their business, due to delays in disbursement of subsidy.  

In order to become an empanelled installer in TEDA, a developer needs to undergo various training sessions and receive certification from the Ministry of Micro, Small and Medium Enterprises (MSME). “From the basics of solar technology to the design of solar plants, the technicalities of rooftop solar are taught in these sessions. An MSME certification is mandatory to get a vendor registration. At times, he/she also has to participate in tenders, to be an empanelled installer,” said Arumugam Dakshinamoorthy, a Chennai-based empanelled installer. 

After all these efforts why is it that installers feel discouraged to continue with the business? Lack of incentives discourages prospective installers. “What’s the point if there is not enough money to do the business? When large sums of money are stuck in government offices, small-time developers find themselves in neck-deep waters,” said Arumugam.

Read more: Pallikaranai apartment shows the way towards greener living

At times, the dire situation compels some entrepreneurs, such as Kumaraguru, to shut down their business. It was his passion for alternative energy that inspired him to be a solar developer. He received the MSME certification ten years ago and was in the trade for two years. “I waited for two years for TEDA to release my dues. It never happened and I had no more money to invest. Hence, I had to quit,” Kumaraguru recalled. 

As subsidies are pending for decades, developers are struggling to survive in the industry.  “About 15 of them from Chennai who were the empanelled installers of TEDA ten years ago, are no longer in this business. All of them are to receive lakhs of pending subsidy amount from MNRE,” said a solar developer. 

“The government which identified the scope of renewable energy a few years ago and introduced subsidies to encourage consumers, has ironically turned the other way around,” Mec Shanlee, Technical director of MecSolar said.

Persuading government agencies to release the due amount is time-consuming and eats into their productivity. “Tired of chasing the agencies, a number of developers have ventured into other businesses, doing rooftop solar only as side projects,” he added. Having installed solar panels for more than 50 houses, Mec Shanlee admits, “One out of three customers opt out owing to delays in disbursement of subsidy.”

Chennai’s solar targets remain unattained

As if a delay in subsidies wasn’t enough, the current situation is worse. For more than two years, subsidies have been paused in Tamil Nadu, discouraging many consumers in Chennai who want to opt for solar.  

“For the 100 calls of interest I received, only 10 of them have installed rooftop solar even without subsidies. The rest of them have been waiting for TEDA to announce subsidies,” said Armugam Dakshnimoorthy.

For the past two years, Sumangali Krishnan, a resident of Chrompet, has been planning to install rooftop solar for her 1000 sq ft residence. As the consumption of electricity rose with work from home becoming the new norm, Sumangali saw a spike in the power bills. “We consume around 20 units a day and pay an average of Rs 3,000 as electricity bill every month. But this seems to be the wrong time to install solar as there are no subsidies in place currently,” she said.

“I have to invest around 3.5 lakh for rooftop solar. If a subsidy is in place, I would get a lakh from TEDA. While I can recover the capital cost in less than five years with the subsidy, it will take me 7 to 8 years to do so without subsidy,” Sumangali said.

While TEDA had blamed COVID-19 as the reason for not announcing new subsidies, the developers attribute it to the lack of funds from MNRE. 

“TEDA is mulling over implementing a 40% subsidy on the first 3KW rooftop solar. In another development, it plans to disburse the subsidy amount to the consumer directly and not to the empanelled installer as it did in previous schemes. However, the scheme is yet to be announced,” a member from the Tamil Nadu Solar Energy Development Association, who is closely associated with TEDA, told this reporter on condition of anonymity. 

(This story was produced with the support of Internews’ Earth Journalism Network) 

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  1. D Suresh says:

    i am confused. right now there is no subsidy
    D Suresh – fondly known as Solar Suresh

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