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Maharashtra bets on agriculture feeder projects


10 December 2018 | BRIDGE TO INDIA

Maharashtra bets on agriculture feeder projects

Last year, the state government of Maharashtra had announced a solar agriculture feeder scheme with the aim to solarise such feeders across the state. Under the scheme, developers would be selected through competitive bidding for project sizes up to 50MW. They would sign fixed-price PPA’s with Maharashtra State Electricity Distribution Company Limited, the state DISCOM, for 25 years. Project sizes are expected to range between 2-50 MW and power would be fed directly into the agricultural feeders. The state aims to solarise its entire agricultural load by 2025 (annual consumption of 30,261 million kWh), equivalent to total solar power capacity potential of about 20,000 MW.

  • Agricultural power subsidies are a major financial burden on the DISCOMs;
  • The government is rightly focusing on distributed solar power to meet the challenge of supplying reliable power to farmers;
  • Solar projects feeding power directly into agriculture feeders offer multiple advantages over solar pumps and other agricultural power schemes;

Providing regular grid power to farmers is an arduous ask for the DISCOMs. They are not only expected to provide (almost) free power to farmers but also endure large T&D losses. Agriculture accounts for a substantial 21% of total DISCOM power sales. As agricultural power is priced almost free across the country and cost of supply including T&D losses is about INR 6.00/ kWh, total annual subsidy cost for the DISCOMs is INR 1,173 billion (USD 16 billion). This is a huge burden on the DISCOMs and a source of most of their financial problems. It also explains why the DISCOMs need to artificially bump up industrial grid tariffs, making Indian industrial tariffs amongst the highest in the world.

Unfortunately, given crucial political importance of the farmer vote, tariff reform for agricultural power is not seen as an acceptable solution. To reduce subsidy burden on the DISCOM’s, many states have therefore announced schemes to separate agriculture feeders. And partly in a bid to promote solar power, the central government announced a solar pump programme in 2014 with a target of installing 1 million pumps (approximately 4,000 MW) by March 2021. Many states including Andhra Pradesh, Uttar Pradesh, Rajasthan, Gujarat and Punjab have issued tenders for solar pumps – total number of pumps installed is estimated to have crossed 240,000 as of March 31, 2018. The pumps are typically funded by 50-90% capital subsidies from the central and state governments with farmers funding the rest. But the solar pump programme has been hampered by poor uptake from farmers, complex procurement process and delays in subsidy disbursements.

Karnataka took a different approach in 2016 by launching a farmer’s solar scheme under which 295 MW capacity with projects of up to 3 MW size has been already commissioned on farmland. Gujarat and Delhi recently announced a slightly different route to develop distributed solar plants at farming sites with the help of financial subsidies and/ or private investments respectively.

Maharashtra has taken an altogether different and seemingly better approach to tackling the agricultural power subsidy problem. The expectation is that by setting up solar plants regionally and feeding power directly to agricultural feeders, average cost of supply can be reduced from INR 6.00/ kWh (rising every year) to about INR 4.00/ kWh fixed for 25 years, thereby cutting the subsidy bill by more than a third. The state has already allocated 250 MW of projects at tariffs between INR 3.07-3.26/ kWh and issued tenders for another 2,250 MW under the scheme.

We believe that the solar agriculture feeder scheme offers major advantages over solar pump and other similar farm power schemes – relatively easy land acquisition, no major transmission investment requirement, time matching between power generation and consumption, and finally, even regional spread of investment and jobs creation. Other states should watch Maharashtra’s progress closely.


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