Kerosene to Solar PV Subsidy Swap

The report argues that redirecting kerosene subsidies toward pico PV solar products can provide a cleaner, cost-effective lighting alternative for marginalized Indian households. It identifies a robust market of internationally verified products and diverse B2C business models, particularly those leveraging microfinance institutions (MFIs). While the swap is technically feasible, the report notes challenges such as the use of kerosene for cooking in Odisha and the prevalence of substandard, unverified products in Uttar Pradesh.

• Government expenditures on kerosene subsidies are estimated to be sufficient to fund the full capital cost of either 350 million entry-level solar lanterns over 1.5 years or 97 million mid-level solar lanterns over two years.
• The Indian pico PV market is segmented by quality: internationally verified products (adhering to Lighting Global/IEC standards), Indian-verified products (following MNRE specifications), and unverified products. Internationally verified products are estimated to hold at least 25% of the total market share.
• Microfinance institutions (MFIs) are the dominant distribution channel for quality pico PV products, accounting for an estimated 75% of the total sales portfolio for leading internationally verified brands.
• In western Uttar Pradesh, the potential for a subsidy swap is limited because subsidized kerosene is primarily used as a motor fuel or cooking backup rather than for lighting, and many households use grid-connected backup systems.
• Odisha is a highly suitable market for a subsidy swap due to high rates of unelectrified households and a strong MFI network, although the fact that households use kerosene for both lighting and cooking complicates the transition.
• The Pay-As-You-Go (PAYG) model is in its infancy in India, hindered by a lack of consumer confidence in mobile technology, regulatory uncertainty, and low rural consumer appetite for digital payment platforms.
• Market spoilage is a significant challenge, particularly in Uttar Pradesh and Bihar, where cheap, unverified, and substandard imported products lead to poor consumer experiences and mistrust in solar technology.

APA

International Institute for Sustainable Development (2018). Kerosene to Solar PV Subsidy Swap. https://www.iisd.org/system/files/publications/kerosene-solar-subsidy-swap.pdf

Chicago

International Institute for Sustainable Development. Kerosene to Solar PV Subsidy Swap. 2018. https://www.iisd.org/system/files/publications/kerosene-solar-subsidy-swap.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=Kerosene to Solar PV Subsidy Swap |date=July 2018 |url=https://www.iisd.org/system/files/publications/kerosene-solar-subsidy-swap.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2018kerosene, author = {{International Institute for Sustainable Development}}, title = {{Kerosene to Solar PV Subsidy Swap}}, institution = {International Institute for Sustainable Development}, year = {2018}, month = jul, url = {https://www.iisd.org/system/files/publications/kerosene-solar-subsidy-swap.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }