KUSUM Program to Get ₹344 Billion to Add Solar Capacity of 26 GW by 2022

The Ministry of New and Renewable Energy (MNRE) has issued detailed guidelines to implement the KUSUM program for India’s farmers to solarize agriculture.

Solar power is one of the most versatile forms of energy, with boundless potential and can be a game-changer for the agricultural sector, saving precious water resources, reducing dependency on the grid, and even becoming an additional revenue stream for farmers.

Mercom previously reported that in March 2019, the central government approved the launch of KUSUM program aimed at helping the farmers install solar pumps and grid-connected solar power projects, which in turn would provide financial and water security to farmers.

The program has been divided into three components and aims to add a solar capacity of 25,750 MW by 2022 with the central government support of ₹344.22 billion (~$4.99 billion).



  • The first component under the program includes the installation of 10,000 MW of decentralized ground-mounted grid-connected renewable power projects.
  • The second component will be the installation of 1.75 million standalone solar-powered agriculture pumps.
  • The third component is solarization of 1 million grid-connected solar-powered agriculture pumps.

According to the ministry, the first and third components of the program will initially be executed in a pilot mode for 1 GW of solar capacity and 100,000 of grid-connected agricultural pumps. The second component will be implemented fully. Overall, the central government will provide ₹190.365 billion (~$2.76 billion) in support.

After the successful implementation of the pilot projects for the first and third components, they will be scaled up with necessary modifications based on the learnings from the pilot phase with the total central government support of ₹153.855 billion (~$2.23 billion).

Under the first component, individual farmers, cooperatives, panchayats, farmer producer organizations (FPO) will install renewable power projects of 500 kW to 2 MW on their barren or cultivable lands. The DISCOMs will purchase the power generated from the renewable power projects at a feed-in tariff (FiT) rate determined by their respective state energy regulators.

These projects must be installed within a five-km radius of sub-stations to avoid the high cost of transmission lines and to reduce transmission losses.

DISCOMs will notify the surplus capacity sub-station wise which can then be fed to the grid and will invite applications from interested beneficiaries for setting up renewable energy projects. The power generated will be purchased by DISCOMs at a pre-fixed levelized tariff. In case the aggregate capacity offered by the applicants is more than the notified capacity for a particular sub-station, the bidding route will be followed by the DISCOMs to select power generators, and in such cases, the prefixed levelized tariff will be the ceiling tariff for bidding.

If farmers, panchayats, FPOs are unable to arrange the equity required for setting up the project, they can opt for setting it up through developers or even through local DISCOM, which will then be considered as the generator. In such a case, the landowner will get the lease rent as mutually agreed between the parties.

For projects under the first component, renewable energy generators will provide a performance bank guarantee (PBG) of ₹500,000 (~$7,245)/MW within 30 days of the issue of the letter of award (LoA). The project must be commissioned within nine months from the date of issuance of the LoA. For a delay of up to two months, the PBG on per day basis and proportionate to the balance capacity not commissioned will be encashed. If commissioning of the solar PV power project is delayed over two months, the PPA capacity will stand reduced to the project capacity commissioned at the end of the 11th month from the date of issuance of the LoA.

If the generator is not able to produce the minimum energy corresponding to the capacity utilization factor (CUF) of 15% or as prescribed by DISCOMs, such a shortfall in the performance will be penalized. The penalty will not be levied if the shortfall is due to grid non-availability for evacuation. DISCOMs will be provided performance-based incentives of ₹0.40 (~$0.0056)/kWh for five years by the MNRE.

Under the second component, individual farmers will get the support to install standalone solar pumps of capacity up to 7.5 HP (horsepower). Solar PV capacity in kW equal to the pump capacity in HP has been allowed under the program. To help install these pumps, central financial assistance (CFA) of 30% of the benchmark cost will be provided by the government. The state government will give financial support to the tune of 30%, and the remaining 40% will be provided by the farmer. Bank finance will be made available for 30% of the farmer’s contribution so that the farmer initially pays only 10% of the cost.

In states and union territories like Sikkim, Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Lakshadweep, and Andaman and Nicobar Islands, a CFA of 50% of the benchmark cost or the tender cost will be provided. The state government will give a subsidy of 30%, and the remaining 20% will be provided by the farmer. Bank finance will also be made available for the farmer’s contribution.

For the second component of KUSUM program, 2% of the eligible CFA will be provided as service charges to all the agencies involved in the program’s execution, including the designated state implementing agency.

State-wise allocation of solar pumps will be issued by the MNRE once in a year after the approval by a screening committee. There will be a centralized tendering of solar water pumping system through central public service units. The MNRE has specified that normally, three bidders will be selected and they will have to match the lowest rates and the quantity awarded will be 50%, 30%, and 20% of the total tender quantity in the ascending order of the rates quoted.

A cluster-based approach will be undertaken for the allocation of districts to the selected bidders to optimize the resources and to ensure that quality services are made available to the farmers. As far as possible, contiguous districts will be allotted to the successful bidders with the total requirements of pumps in the allocated area matching the quantity allotted to them.

The government has also noted that since pumps are generally used for about 150 days in a year, this installed solar PV capacity can be optimally utilized by using Universal Solar Pump Controller (USPC), through which farmers can use solar PV power for other activities like operating chaff cutter, floor mill, cold storage, drier, battery charges, and increase income. An option would be given to the farmers to opt for USPC, and the additional cost of the pumping system with USPC will be discovered by the tendering agency. The entire additional cost will be borne by the farmer. States can choose to bear this additional cost to facilitate the use of solar energy for other activities and increasing the income of farmers.

Under the third component, individual farmers will get support to solarize pumps of capacity up to 7.5 HP. Solar PV capacity up to two times the pump capacity in kW has been allowed. Farmers can sell the excess available energy to the DISCOM. Priority will be given to small and marginal farmers. To minimize the water used for irrigation purposes, preference will be given to farmers using micro-irrigation systems.

The MNRE has specified that it will be mandatory to use indigenously manufactured solar panels with indigenous solar cells and modules. The balance of system (BoS) should also be manufactured indigenously. The vendor must declare the list of imported components used in the solarization system.

Since the power is being used by farmers and not for the government, it is unclear if mandating domestic content will run afoul of WTO rules.

For states and UTs like Sikkim, Jammu & Kashmir, Himachal Pradesh, Uttarakhand, Lakshadweep and Andaman, and the Nicobar Islands, a CFA of 50% of the benchmark cost or the tender cost, whichever is lower, will be provided. The state government will give a subsidy of 30%, and the remaining 20% will be provided by the farmer. Bank finance will be made available for the farmer’s contribution.

For other states, a CFA of 30% of the benchmark cost will be provided by the government. The state government will extend financial support to the tune of 30%, and the remaining 40% will be provided by the farmer. Bank finance will be made available for 30% of the farmer’s contribution so that the farmer initially pays only 10% of the cost.

The solar power fed into the grid and utilized by farmers, both will be accounted for the fulfillment of solar renewable purchase obligation (RPO) by the DISCOM. For the implementation of the third component of the KUSUM program, 2% of the eligible CFA will be provided as service charges to the implementing agencies.

DISCOMs will purchase excess power from the farmers at the rate decided by the respective SERCs. The DISCOMs will ensure “must-run” status to the solarized feeders and will keep such feeders ‘ON’ during sunshine hours of a day. It will be mandatory for implementing agencies to create a remote monitoring system to monitor the performance of the system post-installation.

For the second and third components of the KUSUM program, the MNRE has specified that the successful bidders will provide maintenance services for five years after the installation of the pumps. For projects being set up in the North-Eastern States, Sikkim, Jammu & Kashmir, Himachal Pradesh, and Uttarakhand, Lakshadweep, and Andaman and the Nicobar Islands, the project completion timeline is 15 months from the MNRE approval, and for other states, it is 12 months.

A maximum extension of six months will be provided to set up the pumps. For a delay of more than one month, 10% of the service charge will be deducted, and for a delay of up to three months, an additional 10% of service charge will be cut. Moreover, for a delay of up to six months, an additional 10% of the service charge will be deducted. No extension will be granted beyond six months, and only the systems which are installed and commissioned within the stipulated time will be considered for the release of CFA.

Before the formulation of KUSUM program, the MNRE approved 96,376 standalone solar pumps during 2017-18 and 2018-19 under ‘Phase-II of Off-grid and Decentralized Solar PV Applications’ program.

Image credit: Flickr