Quick Facts
What is a Feed-in Tariff
A Feed-in Tariff is a regulated, per-kWh price that an electricity distribution company or government agency pays a renewable energy generator for power injected into the grid. The price is set in advance by a regulator, applies to all eligible generators within a defined category and capacity band, and is locked into a long-term Power Purchase Agreement that runs for the life of the project, typically 20 to 25 years.
The mechanism comes from European renewable energy policy of the 1990s, where Germany and Spain used guaranteed Feed-in Tariffs to seed early solar and wind investment. India adopted the model for early grid-connected solar projects under the Jawaharlal Nehru National Solar Mission and the first state solar policies.
In current Indian rooftop solar, the FiT is most relevant in three places: gross metering, where 100% of generation is paid at the FiT; net billing, where surplus is paid at the FiT after self-consumption; and end-of-year settlement under net metering, where unused export credits are cashed out at the Average Pooled Power Purchase Cost (APPC) of the DISCOM.
How a Feed-in Tariff works
A solar plant exports electricity to the DISCOM grid through an export meter. The DISCOM reads the meter monthly and multiplies the exported units by the contracted FiT. The product is the gross revenue the plant owner receives for that month.
A 200 kW commercial rooftop in Bengaluru produces around 3,00,000 kWh annually. Under a gross-metering PPA with BESCOM at a FiT of Rs 3.07 per kWh, the annual solar revenue equals 3,00,000 multiplied by 3.07, or Rs 9,21,000. The DISCOM settles this either as a direct credit on the consumer’s electricity bill or as a periodic cash payment, depending on the state.
The FiT is the entire price. There is no separate energy charge, no fixed charge, and no demand charge on top of it. For the DISCOM, the FiT is the all-in cost of acquiring that solar energy.
How FiT is determined in India
State regulators follow a published tariff determination process. The SERC issues a draft order, invites stakeholder comments from DISCOMs, developers, and consumer groups, and finalises the order after public hearings. Inputs to the calculation include capital cost benchmarks (based on actual project costs), O&M expenses, expected generation per kWp, depreciation, return on equity, interest on term loan, and a working capital allowance. The resulting tariff is the levelised price that delivers a target IRR over the project life.
Central FiTs for large solar plants now come from competitive bidding instead of cost-plus determination. SECI runs reverse auctions where developers bid the lowest tariff at which they will build and operate. The lowest-discovered tariff becomes the contract price, often much lower than the cost-plus FiT a regulator would have set.
For rooftop solar, most states publish a benchmark FiT applicable to projects under a stated capacity ceiling, often 500 kW or 1 MW, and use reverse bidding for larger projects.
Feed-in Tariffs in major Indian states (indicative 2026 ranges)
| State | SERC | Indicative Rooftop FiT (Rs/kWh) | Notes |
|---|---|---|---|
| Gujarat | GERC | 2.83 to 3.20 | Lower band for HT, higher for LT residential |
| Maharashtra | MERC | 3.00 to 3.50 | Separate slabs for residential and C&I |
| Karnataka | KERC | 2.83 to 3.07 | Same FiT for all gross metering categories |
| Tamil Nadu | TNERC | 2.50 to 3.00 | Updated under latest rooftop solar tariff order |
| Delhi | DERC | 3.60 to 4.50 | Higher band due to local market context |
| Uttar Pradesh | UPERC | 3.05 to 3.50 | New schemes under PM Surya Ghar framework |
| Rajasthan | RERC | 2.85 to 3.20 | Banking allowed monthly for some categories |
These figures are indicative and change with each tariff order. Always check the latest SERC order before signing a PPA.
Where a FiT shows up in a project’s economics
A solar project’s revenue is the product of its annual generation and the applicable FiT. For a gross-metered plant, all revenue comes from the FiT. For a net-metered plant, most revenue comes from offsetting retail consumption at the retail tariff, and only the end-of-year surplus is monetised at the APPC, which is functionally a FiT.
Because the FiT is fixed in nominal rupees for the PPA term, it does not protect against inflation. A 25-year PPA at Rs 3.20 per kWh signed in 2026 will still pay Rs 3.20 per kWh in 2046, even if the cost of living has doubled. Investors should model this carefully.
The lower the FiT, the more economically valuable self-consumption becomes. This is why net metering, which monetises units at retail tariff, almost always beats gross metering FiTs for self-consuming buildings.
FiT compared with other commercial structures
| Structure | Pricing | Who pays | Who self-consumes |
|---|---|---|---|
| Net metering | Retail tariff (1:1) | DISCOM credit on bill | Consumer |
| Gross metering FiT | Fixed FiT (Rs 2.50 to 4.00) | DISCOM | No self-consumption |
| Net billing | Retail for import, FiT for export | DISCOM | Consumer |
| Open access PPA | Bilateral negotiated tariff | Third-party offtaker | Offtaker |
| Group captive | Generation cost plus margin | Co-owner | Co-owner |
For most rooftop solar customers, net metering is more favourable than a FiT-based gross-metering arrangement. FiTs come into play when self-consumption is low or system size exceeds the net-metering ceiling.
Limitations of the FiT model
The fixed-price guarantee that made early FiTs attractive also created a long-tail financial commitment for DISCOMs. Several Indian DISCOMs ran into difficulty paying FiTs from early high-priced projects and reformed their rooftop programs partly to reduce future exposure.
A FiT does not reward higher-quality generation. A plant with better tilt, lower soiling, or higher-grade modules generates more units, but each unit still earns the same fixed tariff. There is no quality premium.
FiT-based revenue does not adjust for time-of-day. A solar plant generates most of its output during the middle of the day, when peak grid demand may or may not coincide. Some states are introducing time-of-day FiTs that pay more for evening export from battery-backed plants, but these are still rare.
Common mistakes when relying on FiT
Confusing the FiT with the project’s LCOE. The LCOE is the cost of producing electricity. The FiT is the revenue per unit. The project is viable only when FiT exceeds LCOE plus a margin.
Locking into a long PPA without an inflation index. Most Indian FiTs are flat in nominal terms. Twenty-five years is a long time for a flat rupee revenue stream.
Sizing the plant to maximise self-consumption when the chosen structure is gross metering. Under gross metering, self-consumption is zero by definition. Plant size should follow roof area and FiT economics.
Assuming the FiT is the same across all consumers in the state. Many state orders publish multiple FiT bands by capacity and consumer category.
Forgetting that FiTs degrade for new projects. Each tariff cycle reduces the FiT slightly to reflect falling CAPEX. A project commissioned a year later may earn a lower FiT for its full 25-year term.
Standards and process
Tariff orders are issued under Sections 61 and 86 of the Electricity Act 2003, which give SERCs the authority to determine tariffs and promote renewable energy. The MNRE Rooftop Programme guidelines harmonise central subsidy and net-metering norms but leave FiT determination to the states. Inter-state and SECI auctions follow the CERC framework.
A signed PPA at a state FiT is a legally enforceable contract. Disputes are resolved at the relevant State Commission, with appeal to the Appellate Tribunal for Electricity (APTEL) and the Supreme Court if needed.
Related glossary terms
- Gross Metering
- Net Metering
- Power Purchase Agreement
- DISCOM
- Renewable Energy Certificate
- Open Access Solar
- Accelerated Depreciation
Key takeaways
A Feed-in Tariff is the fixed per-kWh price a DISCOM pays a solar generator for energy exported to the grid. In India, state SERCs set rooftop FiTs through tariff orders and central agencies discover utility-scale tariffs through reverse auctions. FiTs are most relevant for gross-metered plants, net-billing surplus, and end-of-year settlement under net metering. For self-consuming buildings, net metering at retail tariff almost always outperforms a FiT-based arrangement.