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This is the third in a series. The first part of this series flagged a freshly-minted vulnerability. In 2012, two years before the Modi government came to power, India imported about 11% of its annual coal requirement, about 71% of its oil, and about 22% of natural gas. Thirteen years down the line, India’s import dependency in all three fuels has risen. India imported more coal (18.86%), more crude (88%) and more gas (51%) in 2025.

This year, once the US and Israel attacked Iran, these costs of this import dependence came to face India. How did the country get here? As the second part of this series said, over the last 14 years, the Modi government has deepened India’s reliance on imported hydrocarbons like natural gas. This push, however, is just half the story. The government has also hamstrung renewables. 

For energy independence, the country had coal (polluting), coal gasification (expensive, energy intensive and polluting) and renewables, especially solar and grid storage. Of these, given that renewables are the future, the Modi government had two tasks before it.

First, to curb reliance on imported fossil fuels, it had to grow renewables faster.

Second, to avoid import dependence, it had to develop an indigenous sector capable of renewables research and development, and manufacturing. That would have flipped India from an, as Modi himself said, an energy importer to an energy exporter.

With that as backdrop, here is what happened.

A year after taking charge as prime minister, Narendra Modi announced a dramatic jump in India’s renewable energy ambitions. Junking the National Solar Mission’s target of boosting India’s solar power capacity to 20 GW by 2022, he said his government would hit 100 GW instead.

As announcements went, this one was welcome. Twenty GW had been an underwhelming target, far below the rate at which India could add solar power. In addition, by 2021, even as the plummeting cost of solar panels from China pushed domestic solar tariffs to Rs 2 per unit, the sector was running into trouble. That year, investments stood at $2.8 billion, a third of what they were the previous year. The previous year, even as nations like Vietnam added 13 GW of fresh capacity, India had added just 3.2 GW. As growth slowed, solar firms were cutting costs, selling off parts of their business, and even winding down.

Some reasons for this drift were well-known. 

What hamstrung solar generation in India?

The rising cost of rural land was making solar parks costlier. The slowdown in the economy – hit first by demonetisation and the Goods and Services Tax, and then by COVID-19 – had depressed demand. The grid’s limited capacity to absorb renewable energy power was a third factor. 

Of these, the last had to do with India’s discoms. Their finances were a mess. The reasons extended beyond old explanations like power theft, sluggish tariff revisions, and wanton capital expenditure. 

One. India had opened solar generation to private firms but left discoms’ financial model untouched. Not only did they give free (or cheap) power to farmers and below-poverty-line families and try to recoup these losses through higher tariffs to industrial customers, they also subsidised renewable power producers.

The last of these points needs to be understood. Unlike coal-based power plants, solar parks cannot stop producing power. For this reason, they have what is known as a “must run” status. The electrons they produce have to flow into the grid. In other words, when solar generation is high, discoms have to curb electricity purchases from other generators — like coal-fired power plants — to accommodate solar power. To ensure these generators don’t slip into losses either, discoms pay them the fixed cost mentioned in the Power Purchase Agreement or PPA, regardless of whether power was supplied or not.

In other words, discoms not only paid Rs 2 per unit for solar power, they also paid Rs 4 or so as fixed cost payments to the non-solar generators which they had on standby. This expenditure, almost a hidden subsidy for solar, could be large. “NTPC’s Kudagi plant makes Rs 4,800 crore a year as just idling cost,” Raman Srikanth, the dean of School of Natural Sciences and Engineering at Bengaluru’s National Institute of Advanced Studies, had told me in 2021. The results were predictable. Cash-strapped, discoms baulked at fresh renewable power contracts and delayed payments to developers. They also attacked rooftop solar. Countries in Europe and elsewhere have been installing panels atop buildings instead of setting up large ground-based solar parks. In India, when industrial clients, tiring of high tariffs, tried to follow suit, discoms made rooftop solar unviable. This slowed India’s solar market further.

India’s solar sector also ailed from terrible market design. Anticipating low participation in solar tenders floated by India’s cash-strapped discoms, India’s Ministry for New and Renewable Energy handed tendering to the Solar Energy Corporation of India (SECI). It floats tenders and chooses winners. Thereafter, it takes the winning bids to discoms, asking them to sign PPAs.

By 2021, cracks were visible in this arrangement. Not only were solar developers participating in bids without knowing if discoms would sign PPAs, it also meant the rate at which India added solar capacity was not determined by supply (investment coming into the sector) or demand (consumers seeking renewable power) but by discoms’ capacity to pay and the rate at which SECI floated new tenders. “Capital is far in excess of the opportunities,” a senior manager working on renewable investments from financial services giant Macquarie Group’s London office had told me. “Even if India were to double its number of solar tenders,........

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