PM-KUSUM – The Solar Saviour?

Jaipur Vidyut Vitran Nigam Issues Tender for 347 MW Solar Projects Under PM-KUSUM

The PM-KUSUM scheme seeks to be the ultimate gamechanger for energy security and the rural economy. We examine the early challenges that it is facing and come to a conclusion. It’s a great idea that will need tweaks to increase coverage, and some key policy interventions to get on schedule. By Prasanna Singh

You know a scheme is truly big and has generated strong interest when scams to take advantage of this interest come up. The Pradhan Mantri Kisan Urja Suraksha Evem Utthan Mahabhiyan (PM-KUSUM) falls squarely in this category. Loosely translated as the Prime Ministers Mass Mission for Energy Security and Progress of farmers, not only has PM-KUSUM energised a host of stakeholders across the supply chain and its intended beneficiaries, the ministry in charge, Ministry of New and Renewable Energy (MNRE) has had its hands full, clearing up questions around it. Its latest denial warns people against fraudulent websites that have come up claiming to ensure subsidies while charging a registration fee. The ministry makes it clear that each state has designated implementing agencies for the scheme.

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So just why is the PM-KUSUM scheme generating so much interest and dare we say it, excitement? For one, the scale of the scheme.

According to the ministry, PM-KUSUM aims to add solar and other renewable capacities of 25,750 MW by 2022 with the total central financial support of Rs. 34,422 Crore. The Scheme consists of three components.

Component A: 10,000 MW of Decentralized Ground Mounted Grid Connected Renewable Power Plants of individual plant size up to 2 MW. Component B: Installation of 17.50 lakh standalone Solar Powered Agriculture Pumps of individual pump capacity up to 7.5 HP and Component C: Solarisation of 10 Lakh Grid-connected Agriculture Pumps of individual pump capacity up to 7.5 HP. Under Component B, individual farmers will be supported to install standalone solar Agriculture pumps of capacity up to 7.5 HP. Under the scheme, 20 lakh farmers will be provided a subsidy for setting up stand-alone solar pumps. Another 15 lakh farmers to be helped to solarise their grid-connected pump sets. This scheme will enable farmers to set up solar power generation capacity on their barren lands and to sell it to the power grid.

These numbers have been broken up by the state, an exercise the MNRE plans to repeat once every year.

The sheer scale means that the scheme offers an opportunity to providers across the supply chain to benefit if they can meet the government’s tough pricing challenge. Currently, the benchmark cost of 1-10 KW solar capacity has been set at Rs 54 per watt. A reduction of RS 6 from the Rs 60 cost from the previous year (2017-18). Interestingly, with EESL in the middle of finalising massive tenders on behalf of the International Solar Alliance, there is every chance of even lower price discovery, and hence, a further drop in the coming year.

So just what are the big challenges the scheme faces?

Right up there is the matter of domestic availability of equipment itself. While pumps are not a challenge for domestic suppliers, the solar part definitely is. Manish Gupta, Managing Director at Insolation Energy, a participant in KUSUM tenders for Rajasthan, points out that the strict DCR (Domestic Content Requirements) mean that module suppliers trip up on the issue of domestic cells sourcing. “There simply isn’t enough domestic cell manufacturing capacity, unlike say, module making capacity. That means, despite the target of 25,000 for Rajasthan in this year, we have barely reached 1500 installations”. The story is repeated in multiple regions, especially Andhra and Gujarat, where slow pickup has been blamed on the same issue too.

A second issue that has been highlighted is the way the scheme targets its beneficiaries. Thus, be it the relative omission of small and marginal farmers, thanks to the higher focus on pumps of 3 HP and higher capacities, or even solarising existing pumps which can be energy guzzlers, everyone has a view.

DINESH PATIDAR, CMD, Shakti Pumps

Dinesh Patidar, CMD of Indore-based Shakti Pumps says that “17% of total energy consumption in India is attributed to agriculture pumps. In terms of energy availability, solar is the best choice with advanced technology. Farmers can also switch over to drip irrigation mode which saves water and power with increased crop output. Subsidies were earlier distorting water use, but if farmers are provided with grid-connected solar pumps, they will use it judiciously as he can make money on the surplus generation now. Even for stand-alone pumps (component B), with predictable solar hours, farmers will not overdraw water“.

VICTOR LESNIEWSKI, Co-Founder and COO,
Khethworks

On the other hand, many sector experts decry the relative omission of small farmers. Victor Lesniewski, Co-Founder and COO at Pune based Khethworks, which works with small farmers holding less than an acre of cultivable land, has a different take. “ We manufacture small solar power pumps. We supply in eastern India. But they don’t fall under the PM Kusum scheme. Our broader observation is that we still don’t see solar pumps reaching farmers who need them the most – marginal farmers. There are some states like Chhattisgarh who have looked at smaller pumps.” Highlighting the need for financing for such small farmers, besides irrigation solutions over just water pumps, Lesniewski is hopeful of a change in scope at some stage to make the scheme more inclusive.

Lesniewski’s view is countered by people pointing to the high subsidy component, as well as the reality of low water tables, especially in North India and parts of South India, which make small-sized pumps limiting for the farmer.

States wise Allocation of capacities under the three components for implementation during the first year of the KUSUM Program

Source: MNRE; Note: DNR (Demand Not Received)

A third issue is as usual with the pressure to keep prices low, even as there is high pressure to deliver not just a robust product but quality service too.

Patidar adds here that “For effective implementation and serious participation by stakeholders, the scheme should be more attractive in terms of benchmark prices in view of the challenges on account of higher costs of implementation and comprehensive maintenance for five years. It also needs to run without diluting product specifications and scheme guidelines for another 10 years.”

Timely payments by the government, in terms of subsidy disbursal, which can go upto 90 percent of the cost in states like Haryana and Madhya Pradesh, is an issue flagged by every stakeholder we spoke to, other than the government.

Top 5 States and Implementing Agencies: PM-KUSUM With Number of Pumps Allocated

For Shakti Pumps, which has got an aggregate installed capacity of over 229MW till now, a major part of which includes KUSUM apart from other solar schemes knows this only too well. “The scheme holds potential business opportunities to stakeholders but it is challenging to maintain a smooth cash flow in view of the current payment terms. Our expectation from the tendering authorities is better project pricing which will ensure the quality of product and after-sales services.“, says Patidar.

And then there is the issue of power subsidies.

Expert after expert that we spoke to highlighted this as a key reason for the slow uptake by farmers, in states ranging Gujarat, to Maharashtra, Punjab and Tamil Nadu. Farmers in poorer eastern states, who get power erratically and would have considered it, are usually too small to make the cut.

ABHISHEK JAIN, Fellow and Director Powering Livelihoods
program, CEEW

Abhishek Jain, Fellow and Director- Powering Livelihoods program at CEEW says that besides the issue of pumps being too large for many farmers, there is the economic case too, which can make it difficult to shift. “Those who have grid-connected pump sets, which are provided free or at nominal costs, the incentives for them to move to solar pumps are very limited. Even though government is providing subsidy, despite that the economic case is not always there for the farmer” He adds that “In a country where 58% of the farmers are marginal and own less than 1 ha of land, if you are not providing a focus on smaller pump sets, it means subsidy outlay will get cornered by larger farmers”.

Jain also highlights sustainability risks. “Look at the northern states. The recurring cost o electricity is so low because you are getting subsidy that you keep on pumping water and the water table is going down. In a solar installation, it becomes a more difficult job to upgrade to higher capacity pumps in case the water table falls because you will have to add new solar panels which are expensive.“

Operators opine that while this is a real issue, it was probably the pressure to show big numbers and meet targets, and the viability of larger pumps, that has led to a focus there for now. Lesniewski also reminds us that not only does the scheme ignore pump sizes under 1 HP, but even the norms to certify such a size, should it be considered in the future, are quite fuzzy right now.

Another interesting issue that gets highlighted is the coordination between EESL (Energy Efficiency Services Limited), the central government-owned entity coordinating the scheme with various state nodal entities. With every state designating a different department or agency to coordinate, both information flow to the beneficiaries, and for the equipment vendors, can be a major issue. Even though centralised tenders try and tackle the problem to a large extent.

Interestingly, vendors would lie nothing more than to see the scheme expanded to cover pumps larger than 7.5 HP, the current limit.

Under the PM-KUSUM scheme, the beneficiary share is a minimum 40% up to 10 HP solar pump capacity. In states like Haryana and Madhya Pradesh, the state governments have given additional top-up on the subsidies thereby reducing the farmer’s share to 10%. This makes the scheme more attractive and farmer-friendly with increased participation which ultimately contributes to the success of the project.

The objective Vs Returns

The PM-KUSUM started off with three key objectives. For state governments, this is a potential way to reduce their subsidy outlay towards irrigation. The other motivation is to expand the irrigation cover by providing decentralized solar-based irrigation and moving away from polluting diesel.

The final and key motivation is obviously increasing farmers’ income. By providing solar energy to farmers, they can sell back excess electricity to the grid and generate income. Typically a 5 hp solar pump would cost around 2.5 lakh rupees. After the scheme, going for the pump is no longer a difficult proposition for a relevant farmer.

ATUL BHATNAGAR, Director, Sun Moksha

Atul Bhatnagar, director at Sun Moksha, a firm into sustainability solutions expects more.

“PM Kusum could be using the latest IoT technology much more effectively to manage grid integration and usage better. If you want to know how the solar pumps are being used from another location, you have to talk to PM Kusum executive. He will ring up the village pradhan. “It’s a flaw we have tried to cover. In our case, if a panel is showing less electricity output the message goes to the villager. And they are able to take the appropriate action.”

He is also skeptical about sustainability, especially in off-grid stand-alone pumps. “Under PM-KUSUM installed pumps will come. As long as the sun is up water will keep coming. The water will start at 7 am and finish at 7 pm unless somebody is motivated to switch it off. In our case, people are able to conserve water and do three crops rather than one.”

“The government does not understand IoT. They are more bothered about providing electricity to the grid.”, he adds.

The Change

For all its challenges, the scheme has started to show some early results too. Mahendra Jain, Additional Chief Secretary of Power, Karnataka, says that solar pumps have led to a shifting of electricity loads for agricultural use from night-time hours to solar hours(daytime hours). PM-KUSUM

He says that the state had set itself a target of being largely free of coal-based power in the next five years. Currently, the state receives 63% of its energy from renewable sources.

Karnataka has already established the world’s largest solar park in the semi-arid region of Pavaguda and is now planning two more such facilities to meet its clean energy goal. Other Indian states are likely to follow Karnataka’s example soon.

The shift in agricultural loads to solar hours is corroborated by Dr. Nikit Abhankar too. Dr. Abhankar is a scientist in the International Energy Analysis Department at the Lawrence Berkeley National Laboratory.

“What is happening in many utilities of Indian states is that they are shifting their agricultural loads to solar hours. Karnataka has shifted out of 2,000 Megawatts from night time to solar hours. By 2030, 40-50 Gigawatts of the agricultural load will shift from night time to solar hours. Around 50% of the state’s electricity needs are used up by the agriculture sector.“

This shift, besides the opportunity to shift out of agricultural power subsidies, a bane for the whole energy sector, is one of the biggest promises of the PM-KUSUM scheme.

Green energy corridors, which are supposed to be dedicated power corridors exclusively for the agricultural sector, are counting on the surplus power from such solar water pumps in a big way to meet requirements, as well as generate income for the farmers selling such power. Component A of the scheme is almost completely focused on these. Local state schemes, with different rates ranging from Rs 7.50 (for seven years) in Gujarat to lower amounts in other states, are also pushing solar adoption faster in the sector. PM-KUSUM

In summation, the PM-KUSUM scheme, like many government schemes, is certainly well-intentioned, except that it will fall short of its ambitious targets for 2024. Rather than a wholesale relook at the scheme, ensuring other related policy interventions, like manufacturing in India for solar cells, or even phasing out power subsidies, might give it the legs to deliver on its promise. If it does that even a couple of years behind schedule, it will be a huge achievement, capable of changing the energy dynamics of Indian agriculture completely, permanently.

With inputs from Biman Mukherjee