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MNRE blames banks for slow progress of solar agri pumps adoption

M Ramesh Chennai | Updated on January 20, 2018 Published on May 24, 2016

The Ministry of New and Renewable Energy has blamed banks’ insistence for collateral security for the poor adoption of solar water pumps in the country.

India has about 20 million agricultural pumps that work on electricity (supplied free) and another 7 million that run on diesel. The government of India aspires to convert these to solar-powered pumps, but in the last three years only about 40,000 solar agri pumps have been installed. Again, most of these have come up under the various state government sponsored subsidy programmes.

To give a fillip to the programme, the MNRE came up in 2011 with a ‘credit-linked capital subsidy’ scheme, under which a farmer would come up with 20 per cent of the cost of the pump upfront and banks would lend the rest. However, once the farmer pays back half the loan, his liability ends as the subsidy element kicks-in, which is paid to the banks by Ministry through the government-owned National Bank for Agricultural and Rural Development (NABARD).

“The progress under the (NABARD) scheme has not been encouraging,” says Tripathy in his letter, noting further that only a thousand pumps have been sold under it.

“One of the major constraints has been that banks are insisting on collateral security in terms of mortgage of land in addition to hypothecation of equipment and many farmers are unable to do so,” the letter says. The Secretary tells banks chiefs to “kindly advise your branches not to insist on such additional security for loans under the scheme, which needs special support from banks.”

The letter notes that only Syndicate Bank has waived mortgage of lands for the loans and asks other banks to “follow the example”.

A typical solar-powered agri pumpset costs between Rs 3 lakh and Rs 5 lakh and “offers a huge lending opportunity to banks.”

Industry experts point to another related issue. Today, state government sponsored subsidy programmes run concurrently with the NABARD scheme. Under the states’ programmes, the farmers get a higher subsidy. MNRE provides a 30 per cent subsidy to which states typically add their own. However, the state programmes are smaller, and are for a few thousand pumps, while the other scheme is open.

Farmers generally fail to see the distinction between the state and the NABARD programmes. The ‘NABARD scheme farmer’ gets put off when he has to pay more than his luckier ‘state programme neighbour’. Further, farmers typically have little collateral to offer for a solar pump loan, after having employed their mortgage-able assets.

To remedy this, the industry has suggested that the states’ schemes be reserved for small farmers, and the NABARD scheme for the rest.

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Published on May 24, 2016
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