What is electricity tariff
Electricity tariff is the per-unit price of electricity, denominated in ₹/kWh (rupees per kilowatt-hour). Indian electricity tariffs are structured by customer category (residential, commercial, industrial, agricultural), consumption slab (low, medium, high), voltage class (LT vs HT), and increasingly by time of day.
The tariff structure typically includes:
- Energy charge: ₹/kWh consumed
- Fixed charge: ₹/month or ₹/kVA
- Demand charge: ₹/kVA for C&I customers
- Cross-subsidy surcharge: for open access consumers
- Taxes and levies: electricity duty, GST on related services
| Component | Basis | Applies to |
|---|---|---|
| Energy charge | ₹/kWh consumed | All customers |
| Fixed charge | ₹/month or ₹/kVA | All customers |
| Demand charge | ₹/kVA | C&I customers |
| Cross-subsidy surcharge | Added to open access energy | Open access consumers |
| Taxes and levies | Electricity duty, GST on related services | All customers |
State Electricity Regulatory Commissions (SERCs) set retail tariffs through annual tariff orders, while CERC sets central tariffs for inter-state matters. Tariff design balances cost recovery for DISCOMs, affordability for residential customers, and competitive rates for industrial growth.
Why tariffs matter
Customer cost. Direct impact on energy bill.
Solar payback. Higher retail tariff means faster solar payback through offsetting consumption, a dynamic accelerating as covered in Electricity Tariff Hikes in 2026, Why Solar Pays Off Faster Now.
PPA structuring. PPA tariff is the contracted long-term price.
FIT design. Sets feed-in tariff for renewable export.
Open access decisions. Tariff differential drives open access procurement.
Investment signals. Tariff trajectory affects renewable investment.
Indian tariff categories
| Category | Description |
|---|---|
| Residential | Domestic household connections |
| Commercial | Shops, offices, hotels |
| Industrial | Manufacturing, processing |
| Agricultural | Pumps, irrigation |
| Public utility | Hospitals, schools, water |
| Railway traction | Indian Railways |
| Bulk supply | DISCOMs from generators |
Technical deep dive
Indian retail tariff slabs (illustrative)
| Category | Slab | Tariff (₹/kWh) |
|---|---|---|
| Residential 1 | 0-100 kWh | 3.00-4.50 |
| Residential 2 | 101-300 kWh | 5.00-7.50 |
| Residential 3 | 301-500 kWh | 7.00-9.00 |
| Residential 4 | 500+ kWh | 8.50-12.00 |
| Commercial LT | All | 7.00-10.00 |
| Commercial HT | All | 6.50-8.50 |
| Industrial LT | All | 6.00-9.00 |
| Industrial HT | All | 5.50-7.50 |
| Agricultural | Subsidised | 0.50-2.00 |
Vary significantly by state.
ToD tariff structure (CEA 2023 framework)
| Time slot | Tariff multiplier |
|---|---|
| Off-peak (10 pm-6 am) | 0.80 |
| Standard (6 am-9 am, 12 pm-6 pm) | 1.00 |
| Peak (9 am-12 pm, 6 pm-10 pm) | 1.20 |
Tariff trajectory by region (residential 300 kWh consumption, illustrative)
| State | ₹/kWh average |
|---|---|
| Delhi | 6.50 |
| Maharashtra | 7.20 |
| Karnataka | 6.80 |
| Tamil Nadu | 5.50 |
| Gujarat | 6.10 |
| Uttar Pradesh | 5.80 |
| Punjab | 5.40 |
| Andhra Pradesh | 6.30 |
Cross-subsidy
Residential and agricultural tariffs typically below cost of supply. C&I tariffs above cost of supply, cross-subsidising other categories.
Cross-subsidy surcharge applied on open access consumers to compensate DISCOMs.
Real-world applications
Customer billing.
Solar payback calculation, often via a solar savings calculator.
PPA negotiation, supported by a solar financial modelling tool to test tariff scenarios.
FIT design.
Open access decisions.
Tariff arbitrage analysis.
Best practices
Read current SERC tariff order before solar project decision.
Account for slab progression in residential.
Use ToD tariff where available for optimal solar economics.
Document tariff assumption in financial models.
Indian market context
DISCOM tariff orders revised annually.
Smart meter rollout supports ToD implementation.
PM Surya Ghar customers see direct retail tariff offset, detailed further in the PM Surya Ghar subsidy calculator guide.
CERC and SERCs coordinate tariff methodology through Forum of Regulators.
Standards and certifications
| Standard | Scope |
|---|---|
| Electricity Act 2003 | Statutory basis |
| CERC Tariff Regulations | Central framework |
| State SERC tariff orders | State-specific tariffs |
| CEA ToD framework | Time-of-day rules |
Key takeaways
Electricity tariffs in India vary by customer category, slab, voltage class and increasingly time of day. Residential tariffs ₹3-12/kWh across slabs. Commercial ₹7-10. Industrial ₹5.50-9. State-specific variation 50-100 percent. SERCs set tariffs annually. ToD tariffs increasingly implemented. Solar payback depends materially on retail tariff offset.
Further reading
For how Tariff plays out in real projects, these guides go deeper:
- Electricity Tariff Hikes 2026: Solar Pays Off Faster
- Gross Metering vs Net Metering: Which to Choose?
- Solar Inverter for a Small Shop or Retail Store
- Bijli Bill Zero Kaise Kare Solar Se (2026)
Sources
- Electricity Act 2003.
- CERC Tariff Regulations 2024.
- State SERC tariff orders.
- CEA Time-of-Day Tariff Rules 2023.
- DISCOM tariff tariff sheets.
- Forum of Regulators publications.
- Power Finance Corporation Tariff Database.
- IEA India Energy Outlook 2024.
- IRENA tariff frameworks publications.
Frequently Asked Questions
What is electricity tariff in simple words?
Who sets tariffs?
What is slab tariff?
Indian residential slab tariff?
What is C&I tariff?
What is HT vs LT tariff?
What is ToD tariff?
What is FIT?
What is PPA tariff?
Does net metering affect tariff?
Why are commercial tariffs higher?
Is GST applicable?
Are tariffs same nationally?
What is fixed charge?
What is the average Indian retail tariff?
From the Blog
Co-founder & CEO driving Qbits Energy's product strategy and growth across India.