8 Key Points From KUSUM Scheme Implementation Guidelines

MNRE has issued guidelines for the implementation of the Rs 34,422 crore KUSUM Scheme

The Ministry of New and Renewable Energy (MNRE) has issued guidelines for the implementation of the Rs 34,422 crore Pradhan Mantri Kisan Urja Suraksha evam Uthan Mahabhiyan (KUSUM) Scheme, that aims to provide both financial security and more sustainable water access for farmers by generating solar power in their farms and use the clean energy to replace their diesel water pumps. 

I. Solarising India’s 30 million agricultural pumps

At present, over 30 million agricultural pumps are installed in India out of which nearly 10 million pumps are diesel based. Discoms are not in a position to energise these pumps through grid connection as seen from the long waiting lists. Also, over 20 million grid-connected agriculture water pumps installed in the country consume more than 17 percent of the total annual electricity consumption of the country. Solarisation of these pumps can reduce the dependence of them on conventional sources of energy supplied by Discoms and thus reducing their burden of subsidy on agriculture consumption of electricity. This will also provide an additional source of income to farmers who will be in a position to sell the surplus power to Discoms.

II. Implementation of Component-A i.e. 10 GW Solar Power Projects

Under this component, solar or other renewable energy based power plants (REPP) of capacity 500 kW to 2 MW will be setup by individual farmers/group of farmers. The REPP will be preferably installed within five km radius of the sub-stations in order to avoid the high cost of sub-transmission lines and to reduce transmission losses.

The Discoms will notify sub-station wise surplus capacity which can be fed from such REPPs to the grid and shall invite applications from interested beneficiaries for setting up the plants. The power generated will be purchased by Discoms at a pre-fixed levelised tariff.

In case the aggregate capacity offered by applicants is more than the notified capacity for a particular sub-station, bidding route will be followed and the prefixed levelised tariff will be the ceiling tariff for bidding. A model PPA (Power Purchase Agreement) will be executed between RPG and Discoms for 25 years.

III. Discoms/Developers can lease land from farmers to develop projects

In case the farmers/group of farmers/cooperatives are not able to arrange equity required for setting up the REPP under the component-A of the scheme, they can opt for developing the REPP through developer(s) or even through local Discom, which will be considered as RPG in this case. In such a case, the landowner will get lease rent as mutually agreed between the parties. The lease rent may be in terms of Rs per year per acre of land or in terms of Rs per unit energy generated per acre of land area.

IV. Time frame for commissioning of the projects

The selected RPG shall commission the solar power plant within nine months from date of issuance of LoA. The RPG may commission the REPP during this period of nine months and the Discom is obliged to purchase power from that commissioned plant any time after the issuance of LoA.

In case any RPG fails to achieve this milestone, the Discom shall encash the Performance Bank Guarantee (PBG) in the following manner:

a. Delay up to two months – The PBG on per day basis and proportionate to the balance capacity not commissioned.

b. In case the commissioning of the solar power plant is delayed over two months, the PPA capacity shall stand reduced/ amended to the project capacity commissioned at the end of 11th month from the date of issuance of LoA.

V. Performance Based Incentives for the Discoms

The Discoms would be eligible to get PBI of Rs 0.40 per unit power purchased or Rs 6.6 lakh per MW of capacity installed, whichever is less, for a period of five years from the commercial operation date (COD).

However, to avail the PBI, the Discom shall submit following documents after completion of one year from the COD and every year thereafter till five years:

a. Timely payment of monthly lease rent, if applicable, to the landowner of the project.

b. Monthly units purchased from the plant and corresponding payment made to the project developer.

The applicable PBI would be released to the Discom after submission of these documents by to MNRE.

VI. Implementation of Component-B i.e. 17.5 lakh solar pumps

Under this Component, individual farmers will be supported to install standalone solar agriculture pumps of capacity up to 7.5 HP for replacement of existing diesel agriculture pumps/ irrigation systems in off-grid areas, where grid supply is not available. Water User Associations and community/cluster based irrigation system will also be covered under this component. However, priority would be given to small and marginal farmers.

The size of the pump would be selected on the basis of the water table in the area, land covered and quantity of water required for irrigation. Solar PV capacity in kW for the pump capacity in HP will be allowed as per MNRE specifications under the scheme.

VII. Central Financial Assistance

CFA of 30% of the benchmark cost or the tender cost, whichever is lower, of the stand-alone solar agriculture pump will be provided. The state government will give a subsidy of 30%, and the remaining 40% will be provided by the farmer. Bank finance may be made available for farmer’s contribution, so that farmer has to initially pay only 10% of the cost and remaining up to 30% of the cost as loan. In case the state government provides a subsidy of more than 30%, the beneficiary share will reduce accordingly.

However, in the NorthEastern States, Sikkim, Jammu & Kashmir, Himachal Pradesh and Uttarakhand, Lakshadweep and A&N Islands, CFA of 50% of the benchmark cost or the tender cost, whichever is lower, of the stand-alone solar pump will be provided. The state government will give a subsidy of 30%, and the remaining 20% will be provided by the farmer.

VIII. Implementation of Component-C i.e. Solarisation of 10 lakh grid-connected pumps

Under this component, individual farmers having grid-connected agriculture pump will be supported to solarise pumps. Solar PV capacity up to two times of pump capacity in kW is allowed under the scheme. CFA similar to that under the component-B of the scheme will be applicable.

For more information on the scheme and its implementation click here.