In a bid to improve the poor performance of its rural solar power initiative, the Ministry of New and Renewable Energy (MNRE) has removed the clause of providing performance bank guarantee (PBG) of ₹5 lakh per megawatt (MW) for solar power generators under the PM-KUSUM scheme.

The move to improve the performance of PM-KUSUM assumes importance as the Centre, in February 2022, wanted to replace diesel with renewable energy (RE) in the farm sector to make it diesel-free by 2024.

In December 2021, the International Energy Agency (IEA) said PM-KUSUM is likely to fall short of its target of setting up 31 gigawatt (GW) of solar power by 2022 due to financing and implementation challenges. The Paris-based agency expects only 10 GW, or roughly one-third capacity, of the total to come online by 2021-26.

Bank guarantees

The ministry has also done away with the requirement of submitting a bank guarantee for solarisation of agriculture feeders under component-C, which is the equivalent to the Central Financial Assistance (CFA) for the said project, MNRE said in a notification.

MNRE added that amendments under component-C will be applicable prospectively to all sanctions for feeder solarisation issued by the ministry under the scheme, except for cases where bids have been closed before this notification was issued.

Poor performance

The performance of the scheme has been very poor, especially in components A and C. In component A, around 4,909 MW capacity has been sanctioned, and of this, just about 42.75 MW capacity, or less than 1 per cent, has been installed till April 2022.

Under component B, the Centre sanctioned 3,59,462 standalone solar water pumps for farmers, including small and marginal farmers, as of April this year. Of this, 97,463 pumps, or around 27 per cent, have been installed.

Component C’s performance has been the most poor so far. As of April 2022, the government sanctioned 76,150 individual solar pumps, of which only 1,026, or around 1.3 per cent, have been installed. The government also sanctioned 9,25,427 feeder level solar (FLS) pumps, but no pump has been installed so far.

What the scheme says

PM-KUSUM aims to provide water and energy security to farmers and enhance their income. It was cleared in February 2019. Under this, 30.8 GW solar power capacity is targeted by 2022 with a CFA of ₹34,035 crore.

It has three components. In component A, the government wants to set up 10,000 megawatts (MW) of decentralised grid connected RE power plants on barren land. In component B, the plan is to install 17.50 lakh standalone solar agriculture pumps. The final, component C is for solarisation of 10 lakh grid-connected agriculture pumps.

Subsidy matrix

The CFA for component A is a procurement-based incentive (PBI) at 40 paise per kilowatt hour (kWh) or ₹6.60 lakh per MW per year, whichever is less, and will be provided for the first five years by MNRE to discoms, for buying power from farmers or developers.

For components B and C, the CFA is 30 per cent of the benchmark cost or the tender cost, whichever is lower. The State government subsidy is 30 per cent, and the remaining 40 per cent is by by the farmer. In north-eastern States, Sikkim, J&K, Himachal, Uttarakhand, Lakshadweep and A&N Islands, the CFA is 50 per cent, State government subsidy is 30 per cent, and the remaining 20 per cent is by the farmer.