Solar Financing and CAPEX Planning for Indian Businesses: How to Fund Rooftop Solar Without Straining Cash Flow

Indian businesses can fund rooftop solar without disrupting working capital through three main routes: a bank term loan backed by the Reserve Bank of India's expanded priority sector lending limit of up to ₹35 crore for renewable…

Why Indian businesses are rushing to lock in solar financing now

Two policy moves in the last twelve months have quietly changed the economics of industrial and commercial rooftop solar energy in India. First, the GST Council cut the tax rate on solar power equipment, including modules, inverters, and balance-of-system components, from 12% to 5%, effective September 22, 2025, according to PV Tech's coverage of the GST Council decision. Second, the Reserve Bank of India raised the priority sector lending ceiling for renewable energy generators from ₹30 crore to ₹35 crore per borrower, effective April 1, 2025, as reported by Mercom India's review of the RBI circular.

Neither change gets much attention outside finance and tax circles, but together they lower both the sticker price of a system and the cost of borrowing to build it. For a business owner staring at a large capital outlay, that is the difference between a project that clears the finance committee and one that sits on a shelf for another budget cycle.

The real obstacle is not the payback period, it is the first cheque

Most industrial and commercial buyers already accept that rooftop solar pays for itself. The friction is upfront. A turnkey rooftop system for a factory or warehouse currently costs approximately ₹32 per watt, or roughly ₹3.2 crore per megawatt, including design, equipment, and installation, according to project cost data published by Bridgeway Power's commercial solar cost breakdown. At typical commercial and industrial tariffs of ₹8 to ₹10 per unit, the same data shows payback periods of roughly 4 to 5.5 years under standard captive-use conditions.

That is a strong return by almost any capital allocation standard. But a 4 to 5 year payback still means the business must find several crore in capital or credit today, at a time when working capital is usually earmarked for inventory, raw materials, or expansion, not a fixed asset with a multi-year return. This is the actual decision point for most owners: not whether solar works, but how to pay for it without starving the rest of the business.

What has changed in how Indian businesses can structure the payment

Three shifts are worth understanding before choosing a financing route.

1. Accelerated depreciation compresses the effective payback

Under Section 32 of the Income Tax Act, 1961, businesses that own their solar asset (the CAPEX route) can claim 40% depreciation per year on the written-down value of the plant, according to India Briefing's explainer on accelerated depreciation for solar assets. In practical terms, this lets a profitable company write off a large share of the system's cost against taxable income in the first two to three years, rather than depreciating it evenly over its full operating life. For companies with sufficient tax liability to absorb the deduction, this is often the single biggest lever for shortening effective payback.

2. Priority sector lending makes bank debt more accessible

With the RBI's revised ₹35 crore ceiling, a wider range of mid-sized industrial and commercial borrowers now qualify for renewable energy loans classified under priority sector lending, which typically carry more favorable terms than standard commercial credit. This matters most for businesses that want to own the asset (to capture depreciation and long-term savings) but do not want to fund it entirely from internal cash.

3. The OPEX/RESCO model shifts risk, not just cost

Not every business wants ownership. Under an OPEX or RESCO (Renewable Energy Service Company) arrangement, a third-party developer builds, owns, and maintains the system on the client's roof, and the client simply signs a long-term power purchase agreement to buy the generated electricity at a rate lower than the grid tariff, with zero capital outlay. Research tracking financing activity in India's commercial and industrial rooftop segment found that OPEX-model borrowers made up only 10 to 15% of total project counts but accounted for 80 to 85% of financing volume, because these projects tend to be larger and are frequently backed by structured credit lines, according to JMK Research's analysis of C&I rooftop solar financing trends. The same research notes that the commercial and industrial segment accounts for close to 75% of all rooftop solar installed in India, underscoring how central business and factory rooftops are to the country's solar power growth story.

Smarter buying criteria: how to choose the right financing structure

Before signing anything, a business should be able to answer these questions with real numbers, not vendor assurances:

• Tax position: Does the business have enough taxable profit in the next two to three years to meaningfully use 40% accelerated depreciation, or would that benefit go unused?
• Balance sheet capacity: Can the business absorb a multi-crore asset and its associated loan without disrupting working capital for core operations?
• Occupancy horizon: Will the business occupy or control this rooftop for long enough (typically 7 to 10 years or more) to fully realize CAPEX ownership benefits, or is a shorter-term OPEX arrangement more appropriate?
• Loan eligibility: Does the project size and structure fit within the RBI's priority sector lending criteria, and has the lender confirmed this in writing?
• Post-tax, post-GST cost clarity: Has the vendor shown the actual landed cost after the 5% GST rate and applicable input tax credit, not just a pre-tax quote?

What to look for in an EPC and financing partner

• A partner who can model both CAPEX (loan plus depreciation) and OPEX (RESCO/PPA) scenarios side by side, in rupee terms, rather than pushing a single structure.
• Transparent, itemized quotes that separate equipment, installation, and financing costs, with GST shown explicitly.
• Demonstrated experience helping clients document and file for accelerated depreciation correctly, since errors here can delay the tax benefit.
• Familiarity with current net metering rules in the relevant state, since export and billing arrangements affect the real payback calculation used in any financing model.
• A track record of working with banks or NBFCs on priority sector renewable energy lending, not just installation.

Turning the numbers into a funded project

Once the tax position, occupancy horizon, and loan eligibility are clear, the financing decision usually resolves itself quickly. This is the kind of structuring conversation SKP Solar World has with business and factory owners across India before a single panel is ordered: comparing the true after-tax cost of ownership against a zero-CAPEX alternative, and matching the structure to how the business actually plans to use its capital over the next several years. For many owners, the fastest way to see where they stand is to compare your current electricity bill with a projected solar savings estimate before committing to either route.

SKP Solar World designs, supplies, and installs rooftop solar systems for homes, businesses, and industrial facilities across India, and works through both CAPEX and financing-linked pathways depending on what fits a given balance sheet. Owners evaluating a facility can also request a site-specific feasibility and financing assessment to see how accelerated depreciation, GST, and current lending limits apply to their specific case.

If the roof is already known to be viable, the next useful step is usually a sizing and cost estimate rather than another round of generic research. Businesses ready to move can get a detailed rooftop solar cost and savings estimate that reflects current GST rates, financing options, and realistic payback timelines for their load profile.

The most practical next step for any business still weighing the decision is a direct comparison: take the last twelve months of actual electricity bills and set them against a projected post-solar bill under both a CAPEX and an OPEX structure. That single comparison, done with real consumption data rather than industry averages, usually makes the right financing route obvious. Businesses can start that comparison directly at skpsolarworld.com, with no obligation to commit until the numbers are clear.

Frequently asked questions

What is the difference between CAPEX and OPEX (RESCO) solar financing?

Under CAPEX, the business pays for and owns the solar system outright, either from cash reserves or a loan, and can claim tax benefits like accelerated depreciation. Under OPEX (also called RESCO, or Renewable Energy Service Company), a third-party developer owns and maintains the system on the business's roof, and the business pays only for the electricity generated, usually at a rate lower than its grid tariff, with no upfront capital outlay.

How does accelerated depreciation reduce the effective cost of a solar investment?

Under Section 32 of the Income Tax Act, 1961, businesses that own their solar asset can claim 40% depreciation per year on its written-down value. This lets a profitable company deduct a large portion of the system's cost against taxable income within the first two to three years, reducing tax liability and effectively shortening the payback period, provided the business has enough taxable profit to use the deduction.

What loan amount qualifies under RBI's priority sector lending for renewable energy?

As of April 1, 2025, the Reserve Bank of India classifies bank loans of up to ₹35 crore per borrower for renewable energy generation, including solar, as priority sector lending, up from the previous ₹30 crore limit. Loans within this ceiling generally qualify for the terms banks extend to priority sector lending, which are typically more favorable than standard commercial credit.

Does GST apply to rooftop solar installation, and can it be claimed back?

Yes. Solar power generating equipment and installation currently attract 5% GST, reduced from 12% effective September 22, 2025. Businesses registered under GST can typically claim input tax credit on this amount against their output tax liability, which further reduces the effective cost of ownership under a CAPEX structure. A tax advisor should confirm eligibility for a specific business's GST registration and use case.

How long does it take for industrial rooftop solar to pay back in India?

At current turnkey costs of approximately ₹32 per watt and typical commercial or industrial electricity tariffs of ₹8 to ₹10 per unit, standard payback periods run roughly 4 to 5.5 years under captive-use conditions. Actual payback depends on roof orientation, shading, local irradiance, sanctioned load, and how much of the generated power is consumed on-site versus exported under net metering.

Sources

• Mercom India: RBI Increases Priority Sector Lending Cap for Renewables to ₹350 Million
• India Briefing: Accelerated Depreciation of Solar Power Assets in India
• PV Tech: India Cuts GST on Renewable Energy Components From 12% to 5%
• Bridgeway Power: 5 MW Solar Power Plant Cost in India
• JMK Research: Financing Trends in India's Rooftop Solar Consumer and Industrial (C&I) Segment