Amendments MNRE Needs to Consider for KUSUM Solar Pump Program To Scale

The government launched the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) in February last year. The objective of this innovative program is to help farmers achieve financial stability and water security. Stakeholders suggest the government make amendments to ensure broader participation and success of the program.

KUSUM   

The KUSUM program consists of three components. Under Component A of the program, individual farmers, cooperatives, and farmer producer organizations with cultivable or barren lands can install solar projects of 500 kW to 2 MW in size. Under Component B of the program, individual farmers will get the government’s support to install standalone solar pumps of up to 7.5 HP (horsepower) capacity. Solar PV capacity in kW equal to the pump capacity in HP is allowed under the program.  Under Component C of the program, individual farmers will get support to solarize pumps of up to 7.5 HP.

According to Dinesh Patidar, Managing Director of Shakti Pumps, “Farmers using grid-connected solar pumps can sell their surplus solar power and generate extra income. Needless to mention, the program is a win-win for farmers and the government. The government can do away with the agriculture power subsidy reducing the burden on the DISCOMs.”


The government has now expanded the program under Component B, and C. Component B now aims to install 2 million standalone solar pumps from its previous target of 1.75 million. Component C aims at solarizing 1.5 million pumps from one million earlier.

The program has opened new avenues for a stable source of income for rural landowners and farmers for 25 years by utilizing their lands. The project helps the farmers with irrigation and mitigates the cost of fuel used for running diesel pumps.

Speaking to Mercom, Devendra Gupta, CEO of Ecozen Solutions, said, “Farmers are benefitting from the program as they are getting irrigation systems that are consistent and are independent of erratic electricity supply. Furthermore, as states are providing subsidies, their contribution is less as well.”

Speaking about the subsidy provided by the government, Devendra added, “Payments are not a concern; the ministry is reviewing this weekly and ensuring that state nodal agencies are releasing timely payments to system integrators.”

Against a target of 108,000 solar pumps to be installed in the financial year, so far, only 5,000 pumps installed. While the program has great potential, some issues need to be addressed for its seamless implementation, accelerated installations, and ensuring higher participation, especially under Component B.

Simplify Eligibility Criteria

Currently, the location for the installation of pumps is divided into clusters (a group of districts). The bidders need to qualify or be eligible for installing each category of pumps under each cluster – 1, 2, 3, 5, 7.5, and 10 HP. Bidders who quote the lowest price (L1) + 15% are selected to install the pumps.

After the selection, the winning bidders need to generate leads, meaning they need to find farmers who are interested in installing the pumps and their size preference. If the bidder is qualified to install 1 and 3 HP pumps and the farmer is interested in a 5 HP pump, the lead will not be useful. They will have to go back and find a farmer who is only interested in a 1 or 3 HP pump to close the deal. If the farmer is interested in a 1 or 3 HP pump but doesn’t belong to the cluster where the bidder is listed, the whole exercise is futile.

Confusing as it is, the whole exercise involves a lot of investment in terms of manpower required to generate leads and the financial obligation to arrange for the (earnest money deposits) bid.

Stakeholders suggest that the implementing agencies must allow eligible bidders to install all capacities of pumps under the tender in a cluster. They also suggest the state nodal share the list of farmers who already paid for the pumps and the capacity of pumps they would want to install.

Performance Bank Guarantee

The performance bank guarantee (PBG) required from the installers is generally 20% of the solar pumps’ cost announced under each cluster. For example, if 200 solar pumps of 7.5 HP are to be installed in a cluster at a price assumed as ₹300,000 ($4,026)/pump. Each bidder must provide a PBG of ₹12 million ($161,073) to participate in the bid.

This criterion is a barrier for many to participate in bids in larger numbers. Instead, PBG could be restricted to the number of pumps the bidders intend to install in a cluster.

Allow Consortiums to Participate

Only a handful of vendors have the financial clout to take part in these tenders across the country. For the 10 HP solar pumps tender through EESL under Component B of the program, Tata Power, Shakti Pumps, Premier Energies, Span Pumps, Junna Solar, and Solex Energy were among the few who emerged as the leading names.

The stakeholders suggest that consortiums of manufacturers and system integrators be allowed to bid. Considering the scale of the program, manufacturers and installers have suggested that a consortium will have better financial, operational, and product capabilities.

Allow Blue Wafers

The solar modules used in the project are mandated to use black wafers, and very few manufacturers are making black wafers in the country. This has hurt the program’s implementation and has led to a shortage of black wafers in the market. It has also increased the procurement cost of solar modules.

The manufacturers suggest that the government should permit blue wafers, as there are several players in the market manufacturing solar cells using blue wafers.

Component C of KUSUM program

“The solarization of existing pumps under Component C without replacing old pumps will not bring desired results as the existing pumps are old and consume a high amount of energy with poor output. Therefore, we suggest an amendment in Component C of the program to include replacing the existing pumps to get better results. To fund solar irrigation projects, state governments can approach the National Bank for Agriculture and Rural Development (NABARD) for availing loans, which will further boost the implementation of the project,” Patidar further added.

Commenting on the success of Component B of the program, Patidar noted, “We feel Component B is the core of the program that offers energy access to non-electrified areas with standalone off-grid pumps while on-grid solar pumps operate in electrified regions. The farmers who were earlier using diesel pumps, causing heavy damage to the environment, are now switching to solar pumps.”

The program’s objective is commendable, but there are many terms and conditions that the implementing agencies need to revise in consultation with the bidders who have participated in multiple tenders and understand the operational realities.

“The program needs to be amended to make it simpler, practical, and take into account the realities on the ground. The goal of all stakeholders, in the end, is the same – make this program a great success for rural India and the farming community,” said Raj Prabhu, CEO of Mercom Capital Group.