PM KUSUM scheme

The Ministry of New and Renewable Energy (MNRE) has introduced a program called Pradhan Mantri Kisan Urja Suraksha evem Utthan Mahabhiyan (PM KUSUM) specifically for farmers. This initiative is designed to assist farmers in setting up solar pumps and connecting them to the power grid, as well as establishing other renewable power plants across the country.

The primary goal of the scheme is to increase the country’s solar and renewable energy capacity to 25,750 megawatts by the year 2022. The total financial support from the central government for this endeavor is set at Rs. 34,422 Crore, inclusive of service charges to the implementing agencies. It’s worth noting that the scheme has recently been extended until March 31, 2026.

Kusum Scheme Details

• The Kusum Scheme is managed by the Ministry of New and Renewable Energy.
• As part of this initiative, the government plans to provide 1.75 million off-grid solar pumps specifically designed for agricultural use.
• Additionally, there is a plan to establish solar plants with a capacity of 10,000 megawatts on unused, barren lands.
• The state electricity distribution companies, known as DISCOMS, will purchase the surplus solar power generated by farmers on unused lands. DISCOMS will receive incentives to encourage them to buy this electricity.
• Existing tube wells and government pumps will be converted to operate using solar power.
• Farmers will receive a 60% subsidy on solar pumps, which will be directly deposited into their bank accounts. This subsidy will be a joint effort between the central and state governments. To cover 30% of the cost, farmers can obtain a bank loan. Consequently, only the remaining 10% will need to be covered by the farmers themselves.

The Scheme consists of three components:

• Component-A: This involves adding 10,000 megawatts of solar capacity by setting up small solar power plants with a capacity of up to 2 megawatts.
• Component-B: The plan includes the installation of 20 lakh standalone solar-powered agricultural pumps.
• Component-C: Additionally, the scheme aims to solarize 15 lakh existing grid-connected agriculture pumps.

The PM-KUSUM scheme is recognized as one of the world’s largest initiatives, aiming to provide clean energy to over 35 lakh farmers by converting their agriculture pumps to solar power under Components B and C.

During the extended period of the scheme until March 2026, certain changes have been introduced:

• Now, farmers can transfer quantities between Component B and C as needed.
• Central Financial Assistance (CFA) will now be available for pump capacities up to 15 HP to individual farmers in North Eastern States, UTs of Jammu & Kashmir and Ladakh, as well as the States of Uttarakhand and Himachal Pradesh. However, the CFA for pumps up to 15 HP will be capped at 10% of the total installations.
• The requirement for domestic content in solar cells has been waived for feeder level solarization under Component-C. This applies to projects awarded by the implementing agency on or before June 20, 2023.
• The budget allocation of Rs. 10,000 Crore approved by CCEA will be utilized before tapping into additional financial resources.

Scheme implementation

The State Nodal Agencies (SNAs) of MNRE will work together with States/UTs, Discoms, and farmers to put the scheme into action.

Components A and C of the scheme will be tested in a pilot mode until December 31, 2019. However, Component B, an ongoing sub-programme, will be implemented fully without going through a pilot phase. If the pilot run of Components A and C is successful, these components will be expanded upon, pending necessary approval.

Component A

• Individual farmers, groups of farmers, cooperatives, panchayats, or Farmer Producer Organisations (FPO) can set up renewable power projects ranging from 500 kW to 2 MW. If these entities can’t gather the required equity for the project, they have the option to collaborate with developers or local DISCOMs, treated as RPG in this scenario.
• DISCOMs will identify surplus capacity at the sub-station level that can be supplied from these renewable energy power plants to the grid. They will then invite applications from interested parties to establish renewable energy plants.
• The power generated from these renewable energy plants will be purchased by DISCOMs at a feed-in-tariff (FiT) determined by the respective State Electricity Regulatory Commission (SERC).
• For a period of five years from the Commercial Operation Date (COD), DISCOMs will be eligible to receive Performance-Based Incentive (PBI) at Rs. 0.40 per unit purchased or Rs. 6.6 lakh per MW of installed capacity, whichever is lower.

Component B

• Individual farmers will receive support to install standalone solar agriculture pumps with a capacity of up to 7.5 HP (15 HP during the extended scheme period).
• A Central Financial Assistance (CFA) of 30% of the benchmark cost or the tender cost, whichever is lower, will be given for the standalone solar agriculture pump. The State Government will provide a subsidy of 30%, and the remaining 40% will be covered by the farmer. To assist the farmer, bank finance may be made available, allowing them to initially pay only 10% of the cost and the remaining up to 30% as a loan.
• In the North Eastern States, Sikkim, Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Lakshadweep, and A&N Islands, a CFA of 50% of the benchmark cost or the tender cost, whichever is lower, will be provided for the standalone solar pump. The State Government will give a subsidy of 30%, and the remaining 20% will be covered by the farmer. Similar to other regions, bank finance may be made available, enabling the farmer to initially pay only 10% of the cost and the remaining up to 10% as a loan.

Component C

• Individual farmers with a grid-connected agriculture pump will receive support to convert it to solar power. The scheme allows for solar PV capacity up to two times the pump capacity in kW.
• Farmers can use the solar power generated to fulfill their irrigation needs, and any excess solar power can be sold to DISCOMs.
• A Central Financial Assistance (CFA) of 30% of the benchmark cost or the tender cost, whichever is lower, will be provided for the solar PV component. The State Government will contribute a subsidy of 30%, and the remaining 40% will be covered by the farmer. To ease the financial burden on the farmer, bank finance may be made available, enabling them to initially pay only 10% of the cost, with the remaining up to 30% covered as a loan.
• In the North Eastern States, Sikkim, Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Lakshadweep, and A&N Islands, a CFA of 50% of the benchmark cost or the tender cost, whichever is lower, will be provided for the solar PV component. The State Government will give a subsidy of 30%, and the remaining 20% will be covered by the farmer. Similar to other regions, bank finance may be made available, allowing the farmer to initially pay only 10% of the cost, with the remaining up to 10% covered as a loan.

Benefits of the Kusum Scheme:

• The scheme empowers the decentralization of solar power production.
• DISCOMS will have better control over transmission losses.
• There will be a significant reduction in the subsidy burden on DISCOMS in the agriculture sector.
• Farmers get the opportunity to sell surplus power generated by solar plants on their unused lands back to the grid.
• The scheme contributes to the growth of the green economy in India.
• The program has the potential to directly generate employment. Studies suggest that approximately 24.50 job-years are created per megawatt of small capacity solar installation. This could lead to employment opportunities equivalent to 7.55 lakh job-years for skilled and unskilled workers.
• The program will facilitate the replacement of existing diesel pumps in the agricultural sector.
• Other advantages for farmers include water conservation, enhanced water security, and improved energy efficiency.

Drawbacks of the Kusum Scheme:

• Due to low electricity costs from subsidies, farmers tend to pump water excessively, leading to a decline in the water table. Upgrading to higher capacity pumps becomes challenging in solar installations, as it requires adding expensive new solar panels.
• The scheme’s focus on pumps of 3 HP and higher capacities results in the exclusion of small and marginal farmers. This means that solar pumps are not reaching the majority of farmers, especially the 85% who are small and marginal. Additionally, the limitation of small-sized pumps becomes a concern in regions with low water tables, notably in North India and parts of South India.
• A significant challenge is the availability of domestic equipment. While pumps pose no issue for domestic suppliers, the supply of solar pumps remains problematic. The strict Domestic Content Requirements (DCR) compel solar equipment suppliers to source cells domestically. However, the insufficient domestic cell manufacturing capacity adds to the logistical issues.