"The ministry has decided to launch a demonstration program to support setting up of megawatt capacity grid-connected solar power generation plants in the country," Minister for New and Renewable Energy Vilas Muttemwar told a news conference Wednesday.

He said the move is aimed at developing and demonstrating technical performance of megawatt-sized grid interactive solar power generation, achieving reduction in the cost of solar components and in the cost of solar power generation in the country.

"In view of the present high initial capital cost of solar power plants and the cost of electricity from such plants, the ministry has decided to provide generation-based incentive for grid-interactive solar power generation," said Muttemwar.

He said under the project, his department would provide a generation-based incentive of a maximum of 270 cents per kilowatt/hour for the electricity generated from solar photovoltaic. Muttemwar said the demonstration program would be limited to an aggregate installed capacity of 50 MW of solar power during the 11th five-year plan period.