PM-KUSUM Yojana - Solar Energy Scheme | IBEF (2024)

The scheme comprises the following components:

1. Component-A: Installation of 10,000 MW of decentralised ground- or stilt-mounted grid-connected solar power plants or other renewable energy-based power plants. Individual farmers, cooperatives, panchayats, solar power developers and farmers' producer organisations can all install these plants.
2. Component-B: Installation of 14 lakh standalone off-grid solar water pumps.
3. Component-C: Solarisation of 35 lakh existing grid-connected agriculture pumps through (i) solarising individual pumps and (ii) solarising at the feeder level.

Components B and C could benefit individual farmers, water user associations, primary agriculture credit societies and community-/cluster-based irrigation systems.

The PM-KUSUM scheme provides Distribution Companies (DISCOMs) with a Procurement-Based Incentive (PBI) to buy solar or other renewable energy. The price at which the PBI is offered is 40 paise per kWh or Rs. 6.60 lakh (US$ 7,904) per megawatt (MW) per year, whichever is less. The renewable energy plant's commercial operation date is followed by a five-year term during which the DISCOMs are granted this PBI. Thus, for every MW of solar or other renewable power purchased, the total PBI payable to DISCOMs is Rs. 33 lakh (US$ 39,518) per MW.

For Component-B and solarisation of individual pumps under Component-C:

Farmers are offered financial support that amounts to 30% of the benchmark cost set by the Ministry of New and Renewable Energy (MNRE) or the prices decided through the tender process, whichever is lower. However, in the northeastern states, including Sikkim, Jammu & Kashmir, Ladakh, Himachal Pradesh, Uttarakhand, Lakshadweep, and Andaman & Nicobar Islands, a higher support of 50% of the benchmark cost set by the MNRE or the prices discovered in the tender, whichever is lower, is extended to the farmers.

Furthermore, the respective state/UT must furnish a minimum of 30% financial assistance. The remaining cost is to be covered by the beneficiary. Components B and C (IPS) of the PM-KUSUM scheme can be executed even without the state's 30% share. The Central Financial Assistance (CFA) will remain at 30%, with the farmer bearing the remaining 70%.

A financial assistance of Rs. 1.05 crore (US$ 125,733) per MW is allocated for the solarisation of agricultural feeders. There is no obligatory need for financial backing from the involved state/UT. Feeder solarisation can be executed either in CAPEX or RESCO mode.

• CFA is currently offered for pump capacities up to 15 HP (raised from 7.5 HP) for individual farmers residing in northeastern states, hilly states/UTs and island UTs. Furthermore, every farmer participating in cluster/community irrigation initiatives in regions with high water tables, spanning across states/UTs, qualifies for CFA.
• Discussions have been held with banks/FIs to ensure low-cost financing options for farmers.
• State-level tenders are permitted for standalone solar pump procurement.
• The implementation timeline has been extended to 24 months from the initial sanction date.
• The requirement for performance bank guarantees has been relaxed under Component-A and Component-C.
• Tender conditions have been revised to broaden the installer base for quicker scheme implementation.
• Solarisation of pumps under Components B and C is now included in the Agriculture Infrastructure Fund (AIF) to provide financed loans to farmers.
• The scheme is now part of the Reserve Bank of India's (RBI) Priority Sector Lending (PSL) Guidelines, making it easier for people to get loans.
• Specifications and testing procedures for solar pumps have been continually revised to confirm installation quality.
• Web portals have been developed at the central and state levels for scheme monitoring.
• Publicity and awareness efforts, including through CPSUs, are being undertaken.
• A toll-free number has been provided for easy access to scheme information.
• Progress is regularly monitored, and clarifications and amendments to the scheme guidelines are issued based on implementation lessons.
• Extension is granted for projects sanctioned under the scheme based on achieved progress and milestones.
• Scheme guidelines were simplified on July 12, 2023, to streamline the land aggregation process in Component-C.
• Benchmark costs were issued under Component-B in September 2023.
• The mandatory state share provision was removed from the scheme through an OM dated November 20, 2023.
• The waiver of DCR content in Component-C was prolonged until March 31, 2024, according to an OM issued on September 11, 2023.
• The Department of Expenditure (DoE) raised the target from 35 lakh to 49 lakh for Composite B and C after issuing an OM on September 6, 2023.

The scheme promises to establish a dependable and consistent revenue stream for rural landowners over a span of 25 years by making use of their dry or uncultivated land. Moreover, in case cultivated fields are selected for installing solar power projects, farmers can continue farming as solar panels will be installed at a height above the ground to allow farming of crops.

The scheme aims to ensure a sufficient supply of solar or other renewable energy-based power is available locally to meet the energy needs of rural areas and agricultural pump sets, which typically require power during daytime. Situating these power plants nearer to agricultural loads or electrical sub-stations in a decentralised fashion will lead to lower transmission losses for STUs and DISCOMs. Additionally, the scheme will aid DISCOMs in achieving their Renewable Purchase Obligation (RPO) targets.

Solar pumps will not just cut costs linked to diesel use for running pumps but also provide farmers with a reliable irrigation option. This helps minimise pollution caused by diesel pumps. With a long queue for electric grid connections, this plan will help 17.5 lakh farmers in four years, without adding pressure on the grid.