Feed In Tariff

What is feed in tariff

Feed in tariff is a regulated per-kWh price paid by the utility to a renewable energy generator for electricity exported to the grid. The tariff is set by an electricity regulatory commission and locked into a long-term contract, typically 25 years. The generator receives the tariff regardless of fluctuations in retail rates, fuel prices or market spot prices.

In India, FIT appears in several forms:

• State SERC tariff orders for gross-metered rooftop solar, setting prices like ₹3.20 per kWh for new commercial connections.
• SECI and CPSU tender results for utility-scale solar, which crystallise into long-term power purchase agreements at the discovered tariff.
• State agency tenders for distributed solar parks under category-specific FITs.

The FIT mechanism gave Indian solar its early policy lift in the 2010 to 2014 period, when tariffs above ₹15 per kWh underwrote the first 5 GW of capacity. Tariffs have since fallen below ₹2.50 per kWh for utility solar, reflecting the dramatic fall in capex.

Feed in tariff explained simply

A regulator decides that any new solar plant signed up this year will be paid a fixed rate per unit for the next 25 years. The DISCOM signs a contract with each generator at that rate. Every unit sent to the grid earns the same fixed price, in good years and bad. The generator knows exactly what to expect, the bank knows what to lend against, and the plant gets built.

That predictability is the entire point of FIT. Without it, building a 25-year asset against fluctuating spot prices would be nearly impossible.

Why FIT matters

Investment certainty. Banks finance solar projects on the strength of a 25-year known revenue. FIT supplies that revenue line.

Renewable capacity addition. India’s growth from under 1 GW solar in 2010 to over 90 GW by 2025 ran almost entirely on FIT and tender-based PPA structures.

DISCOM procurement. State DISCOMs sign FIT-based PPAs to meet their Renewable Purchase Obligation.

Rooftop solar for larger customers. Gross-metered rooftop solar in many states is the only mechanism for systems above the net metering cap.

Policy lever. Regulators use FIT level to encourage or slow specific segments. Higher FITs for distributed solar, lower for utility.

How FIT works

1. The regulator publishes a tariff order with category-specific FITs.
2. A developer applies to the DISCOM or SECI for a project under the prevailing FIT.
3. A 25-year PPA is signed at the discovered tariff.
4. The plant is commissioned and generation begins.
5. A dedicated generation meter records exported energy.
6. The DISCOM pays the developer monthly at FIT rate multiplied by metered generation.
7. Disputes are resolved through CERC or SERC.

Technical deep dive

FIT setting methodology

Regulators model the levelised cost of energy (LCOE) for a representative plant. The LCOE is built up from:

• Capex per MW
• Capacity utilisation factor (CUF)
• Operating costs
• Working capital, debt service and equity return
• Plant life

FIT is set close to LCOE, sometimes with a small premium for distributed segments. Developers and EPCs modelling this trade-off across multiple sites often lean on purpose-built solar financial modeling tools to stress-test capex, CUF and tariff assumptions before bidding.

Sample FIT history

Distributed FIT under SERC orders is typically higher than utility, reflecting smaller scale and higher per-MW capex.

Contract structure

Real-world applications

State gross-metered rooftop solar in Tamil Nadu, Andhra Pradesh, Karnataka, Maharashtra and others.

Utility-scale solar parks under SECI and NTPC tenders.

Distributed solar under state agencies like Solar Energy Corporation of Karnataka and Gujarat Urja Vikas Nigam.

CPSU programmes setting FIT for self-consumption-plus-export configurations.

PM-KUSUM Component C feeders, where FIT is set for agriculture-feeder solarisation, a segment installers pairing solar EPC with KUSUM feeder work know well.

Advantages of FIT

Long-term price certainty for investors.

Simple to administer for the utility.

Encourages standardisation in plant design and construction.

Drives down costs over time as competition pushes tariffs lower.

Supports financing at low cost of capital.

Limitations of FIT

Less efficient than reverse-auction tendering at discovering the lowest tariff.

Risk of stranded contracts if technology costs fall sharply during the term.

Locks utilities into legacy high-cost contracts when newer cheaper sources become available.

Does not value self-consumption.

Requires regulatory capacity to set tariffs accurately.

Common problems

Late payments from cash-strapped DISCOMs. Some states routinely delay solar FIT payments by 90 to 240 days.

FIT revision attempts. Regulators occasionally try to apply revised FITs retrospectively, triggering litigation.

Curtailment without compensation. Excess generation curtailed by the DISCOM may not be paid under some contracts.

Metering disputes. Inaccurate generation meters cause revenue gaps.

Force majeure ambiguity. Cyclones, COVID-related lockdowns and grid restrictions have all triggered disputed force majeure claims.

PSM (Payment Security Mechanism) absence in some PPAs.

Best practices

Read the entire tariff order, not just the headline rate.

Negotiate a payment security mechanism in the PPA.

Confirm the metering arrangement and ownership before signing.

Build cash flow buffers for 180 days of delayed payment.

Maintain detailed generation logs for dispute resolution.

Watch for curtailment events and document them.

Pursue late payment surcharge claims to deter chronic delays.

Comparison: FIT vs reverse auction vs net metering

Homeowners deciding between gross-metered FIT and standard net metering should also see our state-by-state guide on how to apply for net metering in India.

Indian market context

The CERC and state SERCs publish FIT tariff orders periodically. The Forum of Regulators provides cross-state coordination.

Utility-scale FITs are now largely discovered through SECI and state agency tenders rather than through regulator-set rates. The few state-set utility FITs that remain are usually higher than tendered rates.

Distributed FITs for rooftop solar appear in state-specific gross metering frameworks, mostly for C&I.

The Late Payment Surcharge Rules 2022 created a mechanism for DISCOMs to clear outstanding renewable energy dues with escalating penalties.

Standards and certifications

Common mistakes

Assuming FIT escalates with inflation. Most contracts are flat.

Failing to register for payment security mechanism.

Ignoring early payment delays. Habits established in year one persist.

Skipping legal review of PPA terms.

Not modelling curtailment risk in the financial plan.

Selecting a low FIT without checking DISCOM payment history.

Ignoring tariff order amendments published mid-year.

Key takeaways

Feed in tariff is the regulated long-term price that makes solar PV financing possible. Indian FITs have fallen from above ₹15 per kWh in 2010 to below ₹2.50 per kWh in 2024 as capex has collapsed. State SERC orders and SECI tender results define the current FIT landscape. Payment discipline, PPA structure and contract clauses matter as much as the headline rate. For customers weighing FIT-based export against self-consumption, our guide to solar inverter payback period across Indian states works through the underlying math.

Further reading

For how Feed In Tariff plays out in real projects, these guides go deeper:

• Gross Metering vs Net Metering: Which to Choose?
• Net Metering in India, Complete 2026 Guide
• Best Solar Design Software Philippines: 2026 Guide
• Solar Subsidy in Delhi 2026, BSES + TPDDL

Sources

• Electricity Act 2003, Government of India.
• CERC Tariff Regulations 2024 and prior orders, Central Electricity Regulatory Commission.
• State SERC tariff orders for rooftop and utility-scale solar.
• SECI and NTPC tender bid documents and discovered tariffs.
• Late Payment Surcharge Rules 2022, Ministry of Power.
• MNRE Annual Reports on solar capacity addition and tariff trends.
• IRENA Renewable Power Generation Costs in 2024.
• Forum of Regulators publications on distributed renewable tariff design.
• IEA India Energy Outlook 2024, International Energy Agency.