Govt boosts Solar Sector with 60% budget hike: Jefferies

The government is pushing the solar sector in FY26 Budget with a year-on-year (YoY) growth of over 60% to Rs 242 billion (24,200 cr) according to Jefferies.

The report highlighted the government’s continued push for renewable energy particularly through its flagship rooftop solar and solar pump schemes.

Jefferies said, "FY26 budget gives a continued push to solar sector and saw the extension of flagship schemes of solar rooftop, solar pumps, with budget allocations rising 3.2x and 1.7x vs FY25 budget estimates."

A big boost has been given to PM Surya Ghar Muft Bijli Yojana in the budget which aims to install 10 million solar rooftops in residential areas. The allocation for this scheme has been increased by 80% to Rs 200 billion for FY26 over the revised estimate for FY25.

It has increased 3.2 times from its original FY25 BE allocation. The scheme received an approval of the government dated Feb 29, 2024, while the total outlay is set at Rs 750 billion that shall be completed by FY27.

It provides 60% subsidy for solar systems up to 2kW and 40% subsidy for additional capacity up to 3kW with a max cap of 3kW. This translates into subsidy of Rs 30,000 for 1kW system, Rs 60,000 for 2kW and Rs 78,000 for 3kW or above systems at current benchmark prices.

PM-KUSUM scheme which promotes solar powered pumps for farmers has also got a big allocation of Rs 26 billion for FY26, a huge jump from Rs 15 billion in FY25 BE. This shows the government’s focus on increasing solar energy usage in agricultural sector.

Budget also emphasizes Clean Tech manufacturing through National Manufacturing Mission which will support domestic production of solar equipment.

However, report noted that budget lacks clarity on incentives for battery energy storage which is a critical component for integrating renewable energy into the grid.

Increased budgetary support signals the government’s intent to expand the solar energy sector and reduce dependence on conventional energy sources.

With higher subsidies and strong policy support, India is looking to accelerate its transition to clean and sustainable energy solutions.