In India growth of oil-based decentralized (backup and non-backup) power-generating systems is an outcome of the increasing demand for power with security in supply from the consumers. Given the projections on demand for and supply of power through the centralized grid, growth of these systems is bound to be on the rise. The present study, based on primary data collected from a field survey, builds up a database for this decentralized power-generating sector to assess its role in the context of the Indian economy. Cost calculations and on-the-spot measurements of sound pollution and a standard estimate of air pollution from conventional oil-based power generators bring out clearly the problems of the existing systems. It has been shown that if pollution abatement costs and the scarcity value of diesel are included in cost calculation for widely used conventional diesel-based decentralized systems, along with standard accounting costs, then solar photovoltaic (SPV) technologies may be an ideal alternative to conventional oil-based systems in the decentralized power-generating sector. However, to encourage existing private entrepreneurs to go for this new technology, government intervention is necessary in a number of ways.