BackHow feasible is Devendra Fadnavis’s solar pumps plan
Do the Maharashtra govt finances permit spending of around Rs7,500 crore per annum on a single scheme?
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Mumbai: For Maharashtra chief minister Devendra Fadnavis, who has set an admirable target of replacing 2.5 million agricultural pumps in the state with solar-powered pumps over next five years, the devil is in the detail.
Solar pumps has been a pet theme for Fadnavis, who has already made a number of announcements on urban infrastructure, agriculture, ease of doing business, and administrative reforms, among others.
The chief minister claims solar pumps will help reduce power tariff for state’s industrial consumers, which is highest in the country, and attract greater industrial investment. On Friday too, Fadnavis spoke at length about solar pumps at the Maharashtra Economic Summit in Mumbai.
How feasible is the chief minister’s plan?
Agricultural power gets a subsidy of around ₹ 10,000 crore per annum, out of which ₹ 2,000 crore comes from the state government, while the rest is a cross-subsidy from industrial and commercial consumers, who pay much higher than the average tariff. Maharashtra charges industrial users an average of ₹ 8.20 per unit, while neighbouring states such as Gujarat, Karnataka and Chhattisgarh charge ₹ 5.25-6.60.
In order to reduce this burden, the last state government led by the Congress-Nationalist Congress Party had proposed to give direct subsidy to industrial consumers, too, and a 20% rebate for industrial consumers was announced in January 2014. However, this cast a burden of nearly ₹ 750 crore per month on the state government’s coffers; so, one of the first decisions of the BJP-Sena government was to withdraw this subsidy.
However, the move has its own implications. How do you attract industrial investment and actualize ‘Make In Maharashtra’, another Fadnavis project, with such a high power tariff?
The government is left with only two options. Option one is to hike power tariff for agricultural consumers. But like other state governments, the Fadnavis government is also not willing on this count as it could trigger a political backlash.
Option two is to devise a technology-driven solution. In solar power, the Fadnavis government has indeed come up with technological solution, but it too has a cost. Who will bear the cost?
At present, solar-powered agricultural pumps with a five horse power capacity costs around ₹ 5 lakh. Under a scheme being implemented by the Union ministry of new and renewable energy, while the central government gives 30% subsidy to a farmer for purchasing such a pump, the state government must give a matching subsidy while farmer himself must pay 40%.
This means the farmer must pay nearly ₹ 2 lakh to buy a pump. How many farmers will be able to make such a capital investment? Besides, if the state government wants to meet the target of replacing 500,000 pumps every year, it will have to bear a subsidy burden of at least ₹ 7,500 crore per year for the next five years.
So, the next question is, do the state government finances permit spending at such levels on a single scheme?
In such a scenario, the Fadnavis government will have to develop a complex financing model which will involve long-term concessional financing, tax breaks and some kind of public-private partnership, where the investor will pay upfront for farmer’s solar-powered pump and in return, he will share savings the government makes on subsidy payouts and also sells power to electricity grid during lean season when there are no standing crops or water intake is minimal.
As the Fadnavis government nears its 100 days in office on 8 February, time has come for it to get down to the details. Lofty ambitions and vague talk won’t do anymore. Otherwise, it might end up as the previous BJP-Sena government in 1994-99, which was often derided for announcing 100 schemes in 100 days, few of which saw the light of the day.
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