Farmers need a share of the solar boom

Where the Modi government has not yet succeeded is the PM-KUSUM scheme. Its Component A allows farmers to set up solar power plants of up to 2 MW. Unlike PM Surya Ghar, however, it offers no capital subsidy. (Illustration: C R Sasikumar)

India’s solarising journey is a commendable one. Just before the Narendra Modi government assumed office in 2014, the country had just 2.82 GW of installed solar capacity. By August 2026, this had risen to 168.04 GW, a whopping sixtyfold increase, making India the third-largest player in solar after China and the US. Much of this (74 per cent) is utility-scale, led by big companies like Adani Green Energy, ReNew, NTPC, JSW Energy and Greenko Energy. Tata Power Solar is more into engineering, Procurement, and Construction (EPC). Rooftop solar accounts for roughly 20 per cent, and the remainder (about 6 per cent) consists of off-grid and hybrid projects.

The utility-scale solar model has enabled rapid, cost-efficient deployment. These are ground-mounted solar parks, largely on degraded land or wasteland provided by the government. The biggest one coming up is the Khavda Solar Park (30 GW) in the Rann of Kutch region of Gujarat.

Rooftop solar has picked up some momentum under PM Surya Ghar: Muft Bijli Yojana, which aims to bring rooftop solar to 1 crore households. A household installing a 3-kW system gets Rs 78,000 in central subsidy. States such as Uttar Pradesh add another Rs 30,000, taking the total support to Rs 1.08 lakh, against the estimated cost of Rs 1.8 lakh. This amounts to a 60 per cent subsidy. The Delhi government has gone even further and is ready to install free rooftop solar.

Where the Modi government has not yet succeeded is the PM-KUSUM scheme, which was designed to benefit farmers. The scheme was initially envisioned largely around solar pumps. But its Component A also allows farmers to set up solar power plants of up to 2 MW on their land. Unlike PM Surya Ghar, however, it offers no capital subsidy. It is time to rethink and tweak Component A of PM-KUSUM and provide farmers a similar capital subsidy. At the same time, ground-mounted solar projects on agricultural land should be banned, as they directly compete with food production. India cannot afford such a trade-off.

The solution lies in agri-photovoltaics (agri-PV), in which solar panels are installed about 11 feet above the ground, with enough spacing to allow cultivation underneath. This would enable the same land to produce both food and energy. Giving a fillip to this form of Component A could achieve three objectives at once: Augment farmers’ incomes by eight to 10 times, reduce the government’s power subsidy bill, and generate clean energy that can help rural areas industrialise. What is needed is to make capital available to farmers and farmer producer companies (FPCs) at Priority Sector Lending rates, and set the feed-in tariff at half the cost of supplying power to rural areas under the current system.

PM Surya Ghar, by comparison, has an outlay of Rs 75,021 crore. The World Bank has also approved an $820-million loan, including concessional finance and a grant, to support the scheme and mobilise private financing. PM-KUSUM has no equivalent World Bank financing window. It is time for the World Bank to think of solar cooperatives on the lines of the milk cooperatives created under Operation Flood, and help unleash a new rural revolution — call it “PM Surya Khet Kranti”, with solar becoming the farmer’s “third crop”.

At ICRIER, we have demonstrated the potential of this model with support from Kotak Mahindra Bank’s CSR initiative. A 600-kW PM-KUSUM-A plant in Rajasthan, financed through a Rs 1.4-crore loan from the State Bank of India, a Rs 60-lakh farmer contribution and Rs 35 lakh in Kotak CSR support, showed that a farmer’s income could rise from about Rs 40,000 per acre from wheat and bajra to nearly Rs 4 lakh per acre through energy sales and shade-tolerant horticulture. That represents a tenfold increase in income potential.

Agri-PV addresses another major distortion in India’s power sector. Agriculture consumes nearly 260,000 GWh of electricity annually while paying tariffs far below the cost of supply. The CAG’s recent report puts the average cost of supply at about Rs 8.5/kWh against realisation of around Rs 1/kWh from agricultural consumers, a subsidy of roughly Rs 7.5/kWh. With the annual tariff subsidy bill at about Rs 2.35 lakh crore, agriculture may account for nearly 85 per cent of the burden, and higher rural supply costs could push this above 90 per cent. This adds to the financial stress of discoms.

A differentiated feed-in tariff of Rs 4.5/kWh, almost half the cost of supplying power, can improve project viability and accelerate adoption. For discoms and state governments, this needs no additional expenditure, only smarter use of existing subsidies.

The demand for energy is going to go up exponentially as AI data centres start springing up. They are power- and water-guzzlers. They will also have to invest in battery storage or pumped hydro storage without depending on the lithium-ion supply chain. Future agri-PV projects should, therefore, be planned with storage and local grid requirements in mind.

India has seen the power of catalytic finance before. Operation Flood, the foundation of the White Revolution, was supported by a World Bank loan. It helped build a self-sustaining network of village dairy cooperatives and benefited millions of milk producers. A similar opportunity exists today for solar cooperatives. It can go even further and make all gaushalas into solar power plants based on the agri-PV concept and also process dung into organic manure to be sold along with subsidised urea.

India has already shown it can scale solar. The next challenge is to ensure the benefits reach the farm gate. The question is no longer whether India can harvest the sun. It is whether India’s farmers can own a meaningful share of that harvest and the PM realise his unfulfilled dream of doubling farmers’ incomes. Once farmers’ incomes increase by eight to 10 times, as ICRIER’s pilot in Rajasthan has shown, it can spur a manufacturing revolution through augmented demand.

Gulati is distinguished professor and Basu is a research fellow at ICRIER. Views are personal