Rural electrification is an essential requirement for improving the lives of people residing in rural areas and improving their image among the international community. To install Photo Voltaic (PV) panels in isolated regions as per government plans and regulations, solar-based micro grids are needed for Efficiency in the Energy Sector. There are many components required for installing and operating a micro grid. In addition, the location of the micro grid also plays a vital role in the installation. To analyze the difficulties and challenges, especially in hilly terrains, a detailed review of the factors involved in installation of solar-based micro grid is carried out. The general challenges involving the technical difficulties such as the stability, reliability, power imbalance, control and operation are presented in this paper. Stand-alone models of micro grids are described along with its advantages. The government initiatives like subsidies and funding for rural electrification is discussed. As a case study, two micro grids in India, one at Ladakh and one at west Bengal are presented. These case studies bring out the problems and issues faced during the rural electrification and recommendations were given for the future scope.