Conference Agenda

India has made significant strides in expanding its solar market since initiating pilot projects in 1980. This exceptional growth can be attributed to various central and state solar policies. The major push in 2014 came from the central government with the introduction of the Viability Gap Funding (VGF) scheme under the Jawaharlal Nehru National Solar Mission (JNNSM). This initiative included a reverse bidding process on capital subsidy to allocate capacity development among developers. Using a novel auction dataset from 2010-2021, we investigate whether the provision of capital subsidies has contributed to reducing overall solar power tariffs. Our analysis, based on a generalized difference-in-differences (DiD) approach, indicates that the implementation of the VGF scheme resulted in a reduction of the effective feed-in tariff (FiT) inclusive of subsidies. The capital subsidy has resulted in effective FiT by 2.79 standard deviations during the post-treatment period relative to the year preceding the policy implementation. Additionally, we find that subsidy led to the central policy projects experiencing lower effective tariffs compared to state policy projects. However, we find no evidence of differential impact of subsidies based on market concentration levels.