The provision of rural energy in India has been regarded as synonymous with rural electrification. Low load factors, long distribution lines with low load densities and the associated high transmission and distribution losses in most rural areas of India, however make many of the rural electrification programmes economically unattractive. Decentralized energy technologies based on local resource availability can be a viable alternative to rural electrification through the extension of the grid. In this paper, the cost of grid electricity to the end-user is quantified and compared with the cost of electricity from decentralized energy system to obtain the specific distances from the grid, the level of demand and the load factor conditions under which using decentralized energy system for rural India makes economic sense.