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Though solar products such as solar home lighting systems, solar lanterns and solar heaters are all subsidized - between 30 and 40 per cent - most customers are unable to take advantage of the subsidy, a recent study of the solar market has found.
The study, Business innovation and diffusion of off-grid solar technologies in India by Kartikeya Singh, a researcher at Tufts University, US, concluded that "the subsidy regime established by the government of India may not have helped the ecosystem of services and technologies around off-grid solar technologies to thrive. Results suggest that frustration and difficulty in working with the government in this process led many players to operate outside the subsidy regime."
The subsidy is provided by the Indian Renewable Energy Development Agency ( IREDA) through the National Bank for Agriculture and Rural Development (NABARD), which in turn distributes it through public sector banks.
"Given that many buyers of solar products don't have bank accounts, it is difficult for companies to hand-hold them, take them to the bank, open their accounts and have the bank manager consider passing on the loan," said Singh. "Bank managers have to be first convinced that solar is a viable solution.
These managers also rotate every two years and a new one has to be convinced all over again. The company also has the option of passing on the subsidy to the customer first and waiting to be reimbursed by the government. But the wait can be long and companies are therefore reluctant."
Manufacturers of solar products confirmed Singh's findings, maintaining that some banks had even opted out of the process altogether.
"A capital subsidy of 30 per cent was introduced for solar home lighting systems as part of the Jawaharlal Nehru National Solar Mission, but many banks found it was not being distributed in time by NABARD and decided not to have anything to do with it," said Damien Miller, CEO, Orb Energy, which makes a wide array of solar products.
Yet so useful were the products that the market, after an initial wobble, picked up again. "Solar lanterns lead to cost savings compared to kerosene ones because there is no recurring cost," added Miller.
The market price of solar lanterns varies between Rs 500 and Rs 2,500; that of solar home lighting systems between Rs 5,000 and Rs 30,000.
"We make a solar lantern priced at Rs 500 whose cost is the equivalent of the money spent in four months of use of a kerosene lamp," said Anish Thakkar, CEO, Green Light Planet. "What is needed is not subsidy, but easier financing. Our solar home lighting systems cost around Rs 5000-7000, for which we have pay-as-you-go models - the customer pays a small amount every week for six months."
Green Light Planet may be an exception, as Singh's study found that most private companies do not provide customers any kind of financing. "Few of the companies, barring those in the philanthropy business, cater to the absolutely destitute," Singh added. "Many want to do so, but then there is the question of who's willing to pay for what."
Singh's study involved extensive field visits to West Bengal, Bihar, Uttar Pradesh, Rajasthan and Karnataka. Examining the functioning of 69 players in the formal off grid solar market - 52 of them private companies and the rest NGOs, financial institutions, etc - he also found that they were as active in areas which already had access to grid electricity as those which did not.
This was because of the erratic nature of electric supply in India. "Responses revealed that a majority of enterprises provided solar-based energy in areas with grid access," the study said. "The market for solar products is not limited by the grid."
Singh added: "Some micro grid companies told me that there are villages which used to get power from the grid, but when it became erratic, they chose not to pay their electricity bills so their connections were cut off. Then the micro grid company arrived and found the village was so thirsty for electricity, people were willing to pay Rs 400-500 a month for it, provided it was regular."
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