An electrical power system is among the most critical infrastructures which are crucial for the sustainable development of a nation. The progress of a country like India cannot be thought of without being self-sufficient in the rural areas where about 65% of the population resides. The cost of the power grid is increasing and the communities should search for better options from within their available resources to generate energy. Microgrid (MG) formation shall lead to a self-reliant power system providing low-cost energy for consumers. Environmental factors should also be considered while designing a MG. Renewable energy plays a pivotal role in the formation of MGs in rural regions where these sources are available in abundance. For investigation purposes, three villages from Jharkhand, India, are selected in this study. These villages have different types of renewable energy resources and loads within their jurisdiction. The installation of renewable energy sources will make the villages more self-reliant. HOMER software is used during the analysis of the system by considering the renewable energy contribution and subsidy as a factor. Without subsidy, the combination of the system is intended to operate at Rs. 5.32/kWh and with 69.1%, renewable energy sharing of the total load. The best configuration results in a minimum cost of energy (COE) of Rs. 4.92/ kWh (with subsidy) which is less than utility cost (Rs. 6.25/kWh) and has a share of 63.1% of renewable energy.