Loading...

Gujarat aims for the sky


15 November 2018 | Arti Mishra Saran

Gujarat aims for the sky

In June 2018, the state government of Gujarat launched a new scheme – Suryashakti Kisan Yojna (SKY) – for developing distributed solar plants in rural areas. Under the scheme, farmers can set up solar PV plants up to a capacity of 1.25 kW per horsepower of contracted load. The pilot phase envisions a total capacity of 175 MW with a total capital cost of INR 9 billion (USD 0.13 billion). Participating farmers are required to contribute only 5% of the capital cost. 60% of the cost would be funded by central/ state government and balance by loans secured by state government from NABARD or other financial institutions on behalf of the farmers.

Power generated from the solar plants is proposed to be used for captive consumption. Any excess power can be sold to DISCOM at a fixed tariff of INR 3.50/ kWh under a 25-year PPA. The state government would further offer a top-up tariff of INR 3.50/ kWh for the first 7 years. The scheme is structured such that these top-up payments can be used to pay back the loan. In effect, if the scheme works as expected, the farmer is expected to bear only 5% of the capital cost and get PPA revenues to the extent of surplus power generation.

The scheme is intended to provide financial benefit to DISCOMs by cutting loss-making agricultural power consumption from the grid. At present, power supply to agriculture connections for irrigation is heavily subsidized – it is sold at only INR 0.60/ kWh against actual cost of supply of INR 6.00/ kWh. Farmers participating in the scheme would be required to forego future tariff subsidies. 12% of total electricity consumption in Gujarat is estimated to be utilized in irrigation – equivalent to 1,449 million units. That works out to a hefty annual subsidy bill of approximately INR 7 billion for irrigation alone.

The scheme offers other advantages on paper – it proposes to generate solar power without requirement of any additional transmission and evacuation infrastructure. It is also meant to curb overdrawing of underground water as the farmers are incentivised to sell surplus power to the grid for additional income.

Similar previous subsidy-based farm schemes have been blighted by delay in subsidy disbursements, poor physical execution on-the-ground and lack of interest from farmers. It seems they prefer the surety of tariff subsidies over the hassle of installing solar equipment. We also feel that the scheme arithmetic is not all that favourable for the government once all the operational costs and inefficiencies are factored in.

It remains to be seen if the SKY scheme would be any more successful than past initiatives.


Recent reports

India Solar Map | December 2023

India Solar Map | December 2023

India Solar Map 2023 is an info-graphic report covering growth of utility scale solar sector – national and state-wise commissioned and pipeline capacity, leading market players and portfolio details of top 16 project developers. Capacity addition in 2023 fell 51% YOY to 5,924 MW taking total utility scale solar capacity to 59,840 MW. Total project pipeline stands at a record 74,161 MW.

India Corporate Renewable Brief | Q4 2023

India Corporate Renewable Brief | Q4 2023

This report provides an update on key trends and developments in the corporate renewable market including capacity addition, key players, policy & regulatory issuance, financing, PPA tariffs and other market trends.

India PV Module Intelligence Brief | Q4 2023

India PV Module Intelligence Brief | Q4 2023

This report captures quarterly trends in module demand and supply, import and domestic production volumes, supplier market shares, break-up by technology and rating, global market scenario, pricing trends across the value chain, key policy developments and market outlook.

India Solar Compass | Q4 2023

India Solar Compass | Q4 2023

This report provides a detailed update of all key sector developments and trends in the quarter – capacity addition, leading players, tenders and policy announcements, equipment prices, financial deals and other market developments. It also provides market outlook for the next two quarters.

Inter-state OA — opportunities and challenges

Inter-state OA — opportunities and challenges

Inter-state transmission system (ISTS) open access (OA) renewable market is growing strongly on the back of multiple drivers including a waiver from ISTS charges together with decarbonisation pressure on corporates and streamlined transmission connectivity approval process. However, the ISTS route savings are viable only for projects commissioned by June 2026 (at least 75% ISTS charge waiver).

India Corporate Renewable Brief | Q3 2023

India Corporate Renewable Brief | Q3 2023

This report provides an update on key trends and developments in the corporate renewable market including capacity addition, key players, policy & regulatory issuance, financing, PPA tariffs and other market trends.

To top