Centre looks to tap ₹1 tn agri infra fund for solar projects on farm lands

Loans under the ₹1 trillion AIF are capped at 6%, compared to the 8-11% rate usually charged by banks for these projects.

“There are consultations between the ministry of new & renewable energy and the ministry of agriculture to link component A of PM-KUSUM to AIF. Due to AIF support the interest rate would be capped at 6% and farmers would benefit from it as usually loans for solar panels and other equipment are not cheap" said a person in the know of the development.

Another person said that this would also help offtake for power from these power plants as cheaper rate of finance would also ensure lower price of the electricity produced from the solar project.

The ‘Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyaan’ (PM KUSUM) scheme launched in 2019 to double farmers’ income has three components. Under component-A, the government plans to set up 10,000 MW of decentralized ground mounted grid connected solar power plants on farm lands. The other two components are installation of 2 mn standalone solar powered agriculture pumps and solarisation of 1.5 mn existing grid-connected agriculture pumps.

Under component A, solar power plants of capacity up to 2 MW are to be set up by individual farmers, cooperatives, panchayats or farmer producer organisations (FPO) on their barren or cultivable lands and the power generated would be purchased by the power distribution companies (Discom) at tariff determined by respective state electricity regulatory commission (SERC). The scheme was launched to open up a continuous source of income to rural land owners.

Performance-based incentives of 40 paise per unit purchased or ₹6.6 lakh per MW of capacity installed, whichever is less, is provided to the discom for a period of five years from the commercial operation date, under the scheme.

However, the programme has not progress as anticipated. Against the target of 10 GW or 10,000 MW of installed solar capacity under the scheme, only 88.45 MW capacity of solar power plants were installed as of December 2022 under component A of the scheme, shows the annual report of the ministry of new & renewable energy for FY23.

PM-KUSUM is a demand-driven scheme and capacities are allocated based on demand received from the states. In a written report in Lok Sabha, the union minister for new & renewable energy in December last year noted that availability of low-cost financing for farmers and state share of funds is a major challenge in the implementation of the PM-KUSUM.Queries sent to the union ministries of new & renewable energy and agriculture remained unanswered till press time.

Amid the slow progress, the ministry of new and renewable energy is now in consultation with the uinion agriculture ministry to make PM KUSUM beneficiaries eligible for loans from AIF. Earlier this year, the government extended the scheme till FY26. It was originally scheduled to end in FY23.

The ₹1 trillion Agri Infrastructure Fund (AIF) was announced in 2020 under the covid-19 economic package, to offer financial support with an aim to boost post harvest infrastructure including warehouses and community farming assets.

So far loans worth ₹23,798 crore have been sanctioned for 30,009 projects with project cost worth ₹40,343 crore.

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