UPERC Orders Lower Solar Power Tariffs After GST Cut Under PM-KUSUM Scheme In Uttar Pradesh

The Uttar Pradesh Electricity Regulatory Commission (UPERC) has issued a major order that is expected to reduce electricity tariffs for consumers by ensuring that the benefits of lower taxes on renewable energy equipment are passed on through solar power projects. In its suo motu order dated June 23, 2026, the Commission recognized the reduction in Goods and Services Tax (GST) on renewable energy devices as a “Change in Law” event under the PM-KUSUM Component-C2 scheme.

The PM-KUSUM scheme is a flagship initiative of the Central Government aimed at solarizing grid-connected agricultural pumps and providing reliable daytime electricity for irrigation. The program is designed to reduce dependence on conventional power sources while lowering energy costs for farmers. In Uttar Pradesh, feeder-level solarization projects were implemented through a competitive bidding process conducted by the Uttar Pradesh New and Renewable Energy Development Agency (UPNEDA) and Uttar Pradesh Power Corporation Limited (UPPCL).

Under this process, bids were invited for a total solar capacity of 2,553.5 MW across multiple substations in the state. The last date for bid submission was January 9, 2025, with a ceiling tariff of Rs. 2.99 per kWh. Following the bidding process, successful developers received Letters of Award during the first half of 2025 and subsequently signed long-term Power Purchase Agreements (PPAs) for a period of 25 years.

A significant development occurred on September 17, 2025, when the Ministry of Finance reduced the cumulative GST rate on renewable energy devices and their manufacturing components from 12% to 5%, effective September 22, 2025. The Ministry of Power later advised regulatory commissions across the country to ensure that the financial benefits arising from this tax reduction are transferred to electricity consumers.

Since the bids for these projects were submitted before the GST reduction came into effect, UPERC ruled that the tax cut qualifies as a valid “Change in Law” under the PPAs. The Commission clarified that the reduced GST rate would apply to eligible projects where invoices were issued or payments were made on or after September 22, 2025.

To implement the order, UPERC has directed each distribution company (Discom) to form an Expert Committee comprising representatives from UPNEDA, UPPCL, and the respective Discom. Solar developers must submit detailed calculations of the financial impact of the GST reduction, along with auditor-certified documents, within 45 days of achieving Commercial Operation Date (COD). Based on these submissions, the committee will determine revised tariffs for each project. The adjusted rates will then be incorporated through Supplementary PPAs, which must be submitted to the Commission for approval within 90 days of the project becoming operational.