Solar irrigation can transform rural India

The season of election promises is over, arguments have been won and lost on the hustings, but the problems are waiting to be solved.

Agrarian distress is real and persisting, water is growing into an ever bigger human crisis, state power sector has once again managed to bring itself on the edge of the precipice, and the human and fiscal cost of the downward-spiralling nexus between energy, water, and agriculture is staggering.

How do you double farm income without making the farmer dole and debt-waiver dependent? Impressive advancements and rapidly falling prices of solar technology and the recently announced KUSUM scheme of the Centre offer a promising solution.

The KUSUM scheme has three components: (a) private sector led large-scale solar at sub-station; (b) off-grid solar irrigation and (c) grid-connected solar irrigation. Component (a) and (b) either do not solve the real problems of perverse nexus or only improve power supply but cause further damage to groundwater.

Our analysis shows that Component (c) can potentially double the farm income, save groundwater, save subsidy for the State government, and generate jobs.

Political economy in a bind : More than 80 per cent of freshwater is used by agriculture, and more than 60 per cent of India’s irrigated agriculture is via groundwater. “Unmetered” and subsidised energy for agriculture has created a recurring fiscal pressure and burdened industry with cross-subsidy.

Repeated bailouts of the State power sector reflect the way the state power sector has been managed and governed. Sixty five per cent of India’s rural population depends on 15 per cent of its GDP contributed by agriculture, growing at an annual average of less than 2 per cent. Average income of agriculture household in India is less than ₹9,000 per month of which only about half is contributed by farm income (Nabard All India Financial Inclusion Survey 2017).

India cannot address its water and energy economy without addressing agrarian distress and finding non-agriculture income options. Connecting the solar irrigation pumps to the grid to sell surplus electricity provides an additional source of income for the farmer which has been amply demonstrated by International Water Management Institute (IWMI) through a pilot project in Dhundi (Solar Power as a Remunerative Crop- SPaRC) and NDDB’s solar cooperative in Majkuva (Gujarat).

In a recent pilot launched by Punjab ( Pani Bachao, Paisa Kamao with which authors are closely associated) farmers have demonstrated a saving of about 30 per cent due to day time power supply and ability to optimise use of water.

Triple win

A recent analysis carried by the authors on a few 11kV electricity feeders of Rajasthan shows that with grid-connected solarisation of pumps: (i) farmers would get substantial increase in their income that is climate resilient and counter-cyclical to agriculture, and get daytime, reliable, free power supply which reduces their production risk; (ii) recurring power subsidy to agriculture would get replaced by one-time capital subsidy; and (iii) Discoms would get cheap decentralised distributed generation that would reduce their network losses.

Assuming replacement of one horsepower load by 1.5 kW, sale of surplus power at Discom’s average power purchase cost, conversion of 70 per cent farmers on a feeder to solar, and the financing structure of KUSUM-C i.e. 30 per cent subsidy by Central and State government each, 10% equity by farmer and a loan of 30 per cent for seven years at interest rate of 10 per cent, Table 1 shows the profits for the farmer, government, and the Discom. If we add the value of free solar power for irrigation, the farmers benefit would be even higher. Farm income of a typical farmer would increase by about 30 per cent during the 7-year period of loan repayment and by more than 100 per cent thereafter. During drought and crop failure, farmer can reduce the scale of agriculture and earn more money from sale of power. Government subsidy is not an expenditure but a very profitable investment which would save the Government a recurring subsidy of ₹56,000 per farmer- a return of about 30 per cent.

Drought premium : During droughts, the farmer can reduce the scale of agriculture and earn more money from the sale of power. The government would be well advised to pay a “drought premium” for sale of power thus encouraging the farmer to optimise the use of scarce water and adopt a de-minimis approach of using water only for drinking and to grow enough food and fodder for his family and his cattle. Drought premium also offers an instrument for direct delivery of drought relief into the bank accounts of farmers.

Why do we need an FPO/cooperative for this scheme? For grid-connected solar to work, the Discom must keep the feeder “on” during the day as against the current system of supply of four to six hours to contain subsidy. Yet, if a significant number of individual farmers are unable or unwilling to solarise, their power and water consumption would go up since power will be now available for almost 10 hours a day every day, and even subsidy burden on the government would increase. Illegal use and bypassing of meters could increase.

Therefore, the scheme should be made available only if at least 70 per farmers participate (as done by Gujarat) and establish a Farmer Producer Company (FPC) or cooperative. The FPC would sign the PPA, aggregate power from participating farmers, maintain the feeder, and carry out energy accounting based on net meters at the farm and at the sub-station. Formation of FPC would check theft since stolen power belongs to the neighbour and not the government.

Undoubtedly, formation of FPCs, mobilising farmers to participate, and finding debt and equity financing for farmers would be effort intensive but is the most sustainable model of doubling farm income with dignity, saving water, and eliminating anarchy in the agricultural power supply.

Costs of national scale-up

India has about 21 million electric pumps. Focusing initially only on some large States to solarise 20 per cent of farm connections, capital subsidy from Central and State governments would be ₹35,000 crore each, farm loans of ₹35,000 crore and farmer equity of ₹11,000 crore which could be financed by banks against collateral of solar assets.

Increasing the farm income of 4 to 5 million farmers by 30 per cent and putting them well on their way to doubling their farm income would be no mean achievement in five years. In addition, even excluding upstream manufacturing jobs in solar cells, this could generate about 50 million local job-days over five years.

Risks and challenges

Risk of delays and defaults in payment for purchase of power by financially distressed Discoms can undermine this huge opportunity. The government can help catalyse the market by getting the national renewable trader (NVVNL) to buy power from FPCs and sell it to NTPC which can pool it into its large (270 billion kWh) market. Any cost differential could be underwritten by the Centre for the first few years to create a market.

Due to pre-existing large stranded capacity, some Discoms may not be inclined to encourage additional generation. However, stranded-surplus could vanish in the next five to seven years before India reaches a disruptive scale of solarisation.

Mission to farmer dignity: The government should create a “KUSUM Mission” with adequately funded anchor organisation at the Centre and similar organisation in each participating State. These organisations should draw staff from agriculture, water, energy and financial sectors from the public, private, and civil society entities and should be led by a hand-picked leader with a clear target of achieving 20 per cent solar conversion within five years.

NDDB’s expertise in engaging farmers and creating cooperatives would be handy in training these anchor organisations. Dynamism of private sector should be tapped to create FPCs. The agriculture distress, water crisis, and fiscal distress caused by the power sector, has set a fertile ground to take advantage of affordable solar and achieve two grand objectives of doubling farm income and improving India’s water security.

Gulati is former Chief Operating Officer, United Nations Sustainable Energy for All, and Sampath is former Chief Election Commissioner of India

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