Think Beyond Subsidies

Purely providing capital subsidies distorts various sustainable models.

The solar mission as released by the Government of India is perceived to be pro-poor but in practical terms, it is not. Time tested models have proved over the years that purely providing capital subsidies distorts various sustainable models. The solar mission promises 90 percent capital subsidy for systems installed in the remote villages of India.

The critical aspect that the policy makers have overlooked is that it is not the technology that is the barrier but it is the absence of related infrastructure such as doorstep service, need-based application, or different financial products (see Tapping the Sun). The technology exists and need not be subsidized.

The need of the hour is to put in financial resources to encourage entrepreneurs to take it up as a livelihood, to facilitate the banks to provide low cost financing to the poor, entice companies to produce highly efficient, income generating products that can run on solar energy. For example, young entrepreneurs need access to capital and not subsidy. If many of the subsidies offered to large scale solar systems can be diverted to encourage sustainable models (via entrepreneurs and rural financial institutions), India can make solar energy use mainstream much quickly.

The solar mission emphasizes on making solar grid parity by 2022 and coal parity by 2030. Today, the rural and urban poor spend more on energy and therefore solar energy makes sense now! Absence of grid, inefficiency of the public distribution system, and lack of site specific financing is making access to energy unaffordable to the poor. We need not wait till 2022 when economic solutions exist today and there are business models to prove it.

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We need to start thinking differently and there is still time to do that. India does have the chance to prove to the world that solar energy is an important tool to alleviate poverty and solve many of the energy needs in the lower strata of society.

H. Harish Hande is the cofounder and managing director of Selco India.