What Is Feed-in Tariff?

What is a feed-in tariff?

A feed-in tariff is a regulated price for the electricity a solar plant sells to the grid. The State Electricity Regulatory Commission publishes the rate in a tariff order, the DISCOM pays the generator that rate for every kWh exported, and the contract holds for an agreed term. Most rooftop solar agreements in India that involve a feed-in mechanism run for 25 years at the tariff effective on the date of agreement signing.

In Indian rooftop solar policy, the feed-in tariff appears in three places. First, under gross metering, where the DISCOM buys every kWh the inverter sends out at a fixed feed-in rate while the consumer separately buys retail-tariff electricity for consumption. Second, under net metering, where any export credit unused at the financial-year true-up is paid out at a feed-in-style rate (typically the DISCOM's Average Power Purchase Cost). Third, under utility-scale PPAs, where SECI or a state agency conducts a reverse auction and the winning bid becomes the feed-in tariff for the project.

The mechanism exists because the grid needs a clear, contracted price to integrate distributed and centralised solar without ad-hoc negotiation per plant. From the regulator's side, a feed-in tariff is also the lever that controls how much economic benefit accrues to the solar generator versus the DISCOM and its other consumers.

Why feed-in tariff matters

For solar EPCs, the feed-in tariff is the floor on long-term project economics. A net-metered residential rooftop is mostly priced at retail in years one through twenty-five if the customer consumes most generation. But the same project, evaluated in a sensitivity case where the customer's consumption drops or the state moves to net billing, falls to the feed-in tariff. The gap between retail tariff and feed-in tariff in India is typically 50 to 70 percent. Honest proposal modelling shows both cases.

For DISCOMs, feed-in tariffs are a policy lever. Setting the feed-in too high pulls capital into rooftop solar and erodes high-margin commercial revenue. Setting it too low slows residential rooftop adoption and the political case for distributed renewables. SERCs spend their tariff cycle balancing these pressures.

For the consumer, feed-in tariff visibility on the contract is the difference between a system that pays back as advertised and a system that disappoints in year six. Buyers who do not understand the distinction between retail crediting (under net metering) and feed-in crediting (under net billing or gross metering) often discover the gap only when their state changes the rules.

For utility-scale developers, the feed-in tariff discovered at auction defines whether the project IRR meets bank-financing thresholds.

How feed-in tariff is set and paid

1. Tariff petition. The DISCOM or the SERC's renewable energy tariff process opens. Generators, consumer groups, and developers file submissions.
2. Cost methodology. The SERC applies a levelised cost methodology for rooftop solar feed-in or uses Average Power Purchase Cost (APPC) for default settlement. The methodology factors in capital cost, OpEx, financing cost, generation profile, and a regulated return on equity.
3. Tariff order. The SERC publishes the new feed-in tariff in the tariff order, effective from the order date.
4. Project agreement. The rooftop consumer or developer signs a net-metering or gross-metering agreement. The contract pins the feed-in rate to the order in force on the signing date.
5. Monthly metering. The DISCOM records exports through a generation meter (gross metering) or the bi-directional meter (net metering true-up).
6. Settlement. Under gross metering, the DISCOM pays for every exported kWh at the feed-in tariff every month, typically credited against the consumption bill. Under net metering true-up, the DISCOM pays at the year-end feed-in or APPC for any unused surplus.
7. Tariff revision. Each new SERC order can re-set the feed-in tariff for future contracts. Existing contracts are usually grandfathered at the original rate.

Real example: feed-in tariff and a commercial rooftop in Pune

Situation. A 25 kW commercial rooftop on a small auto-component unit in Pimpri, served by MSEDCL. Annual consumption around 28,000 units, annual solar generation around 35,000 units.

Under net metering with normal consumption. The unit nets all generation against its consumption. The only feed-in tariff that touches it is the year-end true-up of about 7,000 surplus units at MSEDCL's APPC rate of roughly ₹3.50 per kWh. That year-end payout is about ₹24,500.

Under hypothetical net billing. The same system, under net billing, would credit every exported kWh at the feed-in tariff (around ₹3.10 to ₹3.50) and bill every imported kWh at retail (around ₹9.50 commercial slab). Even with strong daytime self-consumption, the customer ends up paying close to retail on imports and earning only feed-in on exports. Annual savings drop by 40 to 50 percent versus net metering.

Takeaway. The feed-in tariff is a quiet number on a tariff order page that determines whether a project is bankable or not. The same rooftop, the same generation, the same loads, evaluated under three different settlement regimes, will produce three very different IRRs.

What a clear feed-in tariff regime gives you

• Predictable revenue. A fixed feed-in rate is easier to model than retail tariffs that shift across slabs and seasons.
• Bankability. Lenders prefer projects with contracted long-term revenue, which feed-in tariffs provide.
• Transparent regulator-led process. Tariff orders are public, the methodology is documented, and challenges go through a published consultation.
• Project-finance compatibility. Useful for utility-scale and commercial third-party-owned rooftop projects.
• Grandfathering. Existing contracts protect their original rate even when policy moves.

Limitations of feed-in tariffs in India

Below retail. Indian feed-in tariffs are typically 30 to 60 percent below retail. For self-consumption-dominant rooftops, the financial benefit is structurally weaker than net metering at retail tariff.

Single-year visibility. Each tariff order resets the rate for new contracts. Long-term policy direction is harder to read year over year.

Methodology variation. Different SERCs use slightly different inputs. Comparing across states is not always apples to apples.

APPC volatility. When feed-in tariffs are pegged to APPC, they reflect the DISCOM's bulk-purchase mix. A DISCOM that signs cheaper coal PPAs lowers APPC and reduces what it pays solar exporters.

Curtailment risk. Even when the tariff is contracted, the DISCOM can curtail acceptance during grid stress, which has happened at utility scale.

Not aligned with consumer subsidy frameworks. PM Surya Ghar is built around net metering. A pure feed-in approach for residential leaves subsidy delivery harder.

Feed-in tariffs in India

A snapshot of how Indian feed-in tariffs apply in different contexts (rates are indicative; verify the current SERC order for accuracy before quoting):

Context	Mechanism	Typical rate
Residential rooftop, net metering, year-end true-up	APPC-based	₹2.50 to ₹3.50 per kWh
Commercial rooftop above net-metering cap	Gross metering / net billing	₹3.00 to ₹3.50 per kWh
Karnataka residential above 10 kW	Gross metering	₹3.07 to ₹3.20 per kWh
Utility-scale ground-mounted solar	SECI reverse auction, fixed PPA	₹2.20 to ₹3.00 per kWh
Maharashtra commercial rooftop (recent orders)	Net billing	Approximately ₹3.00 to ₹3.30 per kWh
Tamil Nadu LT industrial (net feed-in)	Feed-in	Around ₹3.00 to ₹3.50 per kWh

For utility-scale solar, the trend over the last decade has been downward as auction tariffs have compressed from ₹10+ per kWh in early projects to ₹2 to ₹3 per kWh in 2024 to 2025 rounds. For distributed rooftop, the trend has been gradual normalisation around APPC for surplus settlement.

Quick facts

Term	Feed-in Tariff (FiT)
Definition	Fixed per-kWh price paid by DISCOM for solar exports
Set by	State Electricity Regulatory Commission (SERC); SECI for utility auctions
Typical Indian rate	₹2.20 to ₹4.50 per kWh depending on context
Tariff duration	Usually 25 years, grandfathered at signing-date rate
Appears in	Gross metering, net billing, year-end net-metering true-up, utility-scale PPAs
Methodology	Levelised cost, APPC-pegged, or reverse-auction-discovered
Trend in India	Utility-scale rates compressed sharply; distributed rooftop rates aligned with APPC

Common mistakes about feed-in tariffs

1. Quoting retail savings under a gross metering or net billing regime. The customer earns feed-in, not retail, on exports.
2. Treating the feed-in tariff as a single national number. It is set state by state, and varies with the year of the order.
3. Forgetting that feed-in tariffs are nominal, not inflation-indexed. A 25-year contract at ₹3 per kWh is a 25-year contract at ₹3 per kWh.
4. Confusing APPC with feed-in tariff. They are related but methodologically different. Some states use one to set the other.
5. Assuming feed-in tariffs are guaranteed payment. DISCOMs can delay disbursement when stressed.
6. Mixing utility-scale and rooftop benchmarks. Utility-scale auction tariffs are not directly comparable to rooftop feed-in rates.
7. Quoting policy direction as fact. "The feed-in tariff is going up to ₹X next year" is speculation unless the SERC has notified.
8. Ignoring the grandfathering clause. Always check the agreement: which rate applies on which date.

Key takeaways

• A feed-in tariff is the fixed per-kWh price the DISCOM pays for solar exports, set by the SERC.
• Indian rooftop feed-in tariffs are typically ₹2.50 to ₹4.50 per kWh, far below retail tariff.
• It appears in gross metering, net billing, year-end net-metering true-up, and utility-scale PPAs.
• Existing agreements are usually grandfathered at the rate in force on the signing date.
• For self-consumption-dominant rooftops, net metering at retail tariff outperforms a feed-in regime.
• For utility-scale, the auction-discovered tariff is effectively the feed-in tariff for the 25-year PPA.
• Always check the current SERC order. Each state, each year, is its own answer.

Frequently Asked Questions

Sources

• Central Electricity Regulatory Commission (CERC). Renewable energy tariff regulations and orders. cercind.gov.in
• State Electricity Regulatory Commissions. Tariff orders defining feed-in tariffs and APPC for Gujarat (GERC), Maharashtra (MERC), Karnataka (KERC), Tamil Nadu (TNERC), Delhi (DERC), and others.
• SECI (Solar Energy Corporation of India). Auction results for utility-scale solar PPAs.
• Ministry of New and Renewable Energy (MNRE). Guidelines and tariff benchmarks for grid-connected rooftop solar.
• IRENA and CEA reports. Comparative analysis of feed-in tariff models in renewable energy policy.
• Forum of Regulators (FOR). Model regulations covering tariff design for distributed solar.
• State DISCOM tariff petitions. Annual filings disclosing the APPC and bulk procurement mix.