To combat rising power demand, the Union Government is rolling out a financial incentive scheme under the PM Modi AC Yojana 2025, encouraging households to swap outdated, power-hungry air conditioners with new five-star-rated models. The move is part of a broader push to promote energy-efficient technologies and curb electricity consumption.
Spearheaded by the Ministry of Power and the Bureau of Energy Efficiency (BEE), the initiative also aims to ease pressure on the national power grid, especially during peak summer months, while helping consumers cut down on electricity bills.
New AC scheme could slash household bills by ₹6,300 a year
The move comes amid a sharp spike in air conditioner usage across India, with annual sales climbing from 8.4 million units in 2021–22 to nearly 11 million in 2023–24. This surge has significantly impacted electricity consumption, buildings alone used around 500 terawatt-hours last year, with cooling making up nearly 25% of the load. A large portion of households still rely on older AC units rated below three stars, which are far less energy-efficient. According to the Bureau of Energy Efficiency (BEE), switching to a new 5-star rated AC could help families save up to ₹6,300 a year on electricity bills.
The scheme may offer multiple benefits-
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Manufacturer Discounts: Instant price reductions on 5-star ACs when exchanging old units.
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Electricity Bill Rebates: Potential bill credits for households upgrading to energy-efficient models, in collaboration with DISCOMS.
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Buyback via Recyclers: Old ACs can be handed over to certified recyclers in exchange for discount certificates.
It also supports the India Cooling Action Plan (ICAP), which targets a 40% reduction in cooling energy demand by 2038. A similar BSES program in Delhi offers 60% discounts on 5-star ACs for old units. The government has begun consultations with major manufacturers like Voltas, Blue Star, LG, Samsung, and Lloyd to ensure industry support and smooth implementation.