PM-KUSUM Solar Projects in India: A Comprehensive Analysis

Executive Summary

The Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyan (PM-KUSUM) represents one of India’s most ambitious initiatives to transform agricultural energy infrastructure through solar power. Launched in March 2019 by the Ministry of New and Renewable Energy (MNRE), the scheme aims to add 34,800 MW of solar capacity by March 2026 with a total central financial support of ₹34,422 crore. As of November 2025, over 10,203 MW has been installed, benefiting more than 20 lakh farmers across India. However, the scheme faces significant implementation challenges, with only 25-30% of targets achieved across most components.

Scheme Structure and Components

PM-KUSUM operates through three distinct components, each targeting different aspects of agricultural solar adoption:

Component A: Decentralized Grid-Connected Solar Plants

This component facilitates the installation of 10,000 MW of ground or stilt-mounted solar power plants ranging from 500 kW to 2 MW capacity. Individual farmers, cooperatives, panchayats, Farmer Producer Organizations (FPOs), and Water User Associations can establish these plants on barren or agricultural land. The generated power is purchased by DISCOMs at feed-in tariffs determined by State Electricity Regulatory Commissions for 25 years. DISCOMs receive a Performance-Based Incentive of ₹0.40 per unit or ₹6.6 lakh per MW annually (whichever is lower) for five years.

Component B: Standalone Solar Pumps

This component targets the installation of 14 lakh standalone solar pumps up to 7.5 HP capacity (raised to 15 HP in special category states) in off-grid areas. The subsidy structure involves 30% central financial assistance, 30% state subsidy, and 40% farmer contribution. For northeastern and hilly states, central assistance increases to 50%, state contribution remains 30%, and farmer share reduces to 20%.

Current Status: 9.17 lakh pumps installed out of 12.72 lakh sanctioned (approximately 71% achievement). Maharashtra leads with 415,147 installed pumps.

Component C: Solarization of Grid-Connected Pumps

This component has two sub-categories:

Individual Pump Solarization (IPS): Converting existing grid-connected pumps to solar
Feeder Level Solarization (FLS): Solarizing entire agricultural feeders to provide reliable daytime power

Component C follows similar subsidy structures as Component B and can be executed in either CAPEX or RESCO (Renewable Energy Service Company) mode.

Current Status: Only 7,660 individual pumps solarized, with 468,838 feeders completed (13% of target). Uttar Pradesh leads IPS with 3,493 pumps.

State-wise Implementation Analysis

Leading States

Maharashtra:

Dominates with over 11.2 lakh beneficiaries and 1,576 MW installed capacity
Received ₹1,154 crore in FY 2024-25 (58% of total funds released)
Set a Guinness World Record by installing 45,000 solar pumps in one month
Major tender winner: SJVN (1,352 MW), MEIL (1,880 MW), Avaada Energy (1,132 MW) under 7.78 GW auction

Haryana:

Second-largest with 981 MW installed capacity
Strong performance in Component B with multiple pump installations
Key vendors: Oswal Pumps (6,471 pumps), Shakti Pumps (4,573 pumps), AVI Appliances (3,360 pumps)

Rajasthan:

805 MW installed, leading in Component A
Allocated additional 5,000 MW capacity under Component A in 2025
Approved tariff of ₹3.04/unit for new projects
Strong feeder-level solarization progress with 850.78 MW sanctioned across 373 projects

Gujarat:

479 MW awarded under Component C across 170 locations
Tariffs ranging from ₹2.87 to ₹3.00 per kWh
Winners include Onix Renewable (187 MW), WAA Solar, Raghuvir Avenues, and GreenBloom Energy

Madhya Pradesh:

Recent massive 4.3 GW tender resulted in 4.01 GW awarded to 82 companies
Dilip Buildcon emerged as the biggest winner with 1,363.54 MW
Other major winners: Sunbridge Solar Power (471.29 MW), Landsmill Industries (422.02 MW)
Tariffs ranging from ₹2.68 to ₹2.85 per kWh

Uttar Pradesh, Chhattisgarh, and Karnataka are also showing increased activity with state-specific budget allocations and implementation support.

Financial Analysis and IRR Expectations

Capital Expenditure

For a 1 MW ground-mounted solar plant under PM-KUSUM, typical CAPEX ranges from ₹3.5 to ₹4.5 crore, depending on:

Land development and site conditions
Evacuation infrastructure distance
Module and inverter choices
Substation and bay work requirements
State-specific costs and regulatory requirements

Revenue Projections

Component A Projects:

Annual generation: 16-18 lakh units per MW
Tariff range: ₹2.87 to ₹3.55 per kWh across states
Annual revenue: ₹48-54 lakh per MW
Farmer land lease income: ₹25,000 to ₹80,000 per hectare per year
Median income for commissioned plants: ₹4.5 lakh per MW per month

Internal Rate of Return (IRR)

Industry experts and EPC companies project pre-tax IRR in the range of 12-16% for well-executed projects. Key factors affecting IRR include:

Discovered tariff rates (currently ₹2.68 to ₹3.55 per kWh)
Capacity Utilization Factor (CUF) of 18-22% (higher in optimal locations)
Operation & Maintenance costs over 25-year PPA period
Financing costs and debt-equity ratio
Project execution quality and timely commissioning

Subsidy Structure Impact

The central financial assistance of 30% (50% in special category states) significantly improves project viability. For feeder-level solarization, the CFA is capped at ₹1.05 crore per MW (₹1.75 crore for special states), corresponding to 30% of benchmark costs estimated at ₹3.5 crore per MW.

Major Winners and Key Players

Component A & C (Large-Scale Projects)

Dilip Buildcon – 1,363.54 MW (Madhya Pradesh)
MEIL (Megha Engineering) – 1,880 MW (Maharashtra)
SJVN Green Energy – 1,352 MW (Maharashtra)
Avaada Energy – 1,132 MW (Maharashtra)
MAHAGENCO – 1,071 MW (Maharashtra)
Sunbridge Solar Power – 471.29 MW (Madhya Pradesh)
Landsmill Industries – 422.02 MW (Madhya Pradesh)
Onix Renewable – 187 MW (Gujarat)
NACOF Oorja – 990 MW (Maharashtra)
Torrent Power – 306 MW (Maharashtra)

Component B (Solar Pumps)

Oswal Pumps – 6,471 pumps (Haryana)
Shakti Pumps – 7,747 pumps across states
AVI Appliances – 6,171 pumps
Himalayan Solar – 1,748 pumps
Ecozen Solutions – 1,169 pumps
Alpex Solar – 2,575 pumps
Rotomag Motors – 2,659 pumps
Ethos Power – 1,808 pumps

Execution Challenges

Despite ambitious targets, PM-KUSUM faces multiple implementation bottlenecks:

Financial Challenges

High upfront costs: Farmers often lack collateral for bank loans, despite subsidies covering 60%. Hence developers step in with the equity and pay meagre amounts as lease to farmers.
Payment delays: DISCOMs frequently delay payments to developers, affecting project viability and subsequent payments to farmers for land lease gets affected.
Financing access: High margin money requirements create barriers, especially for Component A
State subsidy gaps: Some states struggle to provide their 30% contribution
Perceived limited returns: Farmers compare benefits unfavorably against existing electricity subsidies

Technical and Operational Issues

Limited domestic pump availability: Insufficient production of domestically compliant solar pumps
Capacity mismatch: Focus on 3+ HP pumps excludes 85% of small/marginal farmers needing smaller capacity
Grid evacuation constraints: Inadequate power evacuation infrastructure, particularly in remote areas
Quality control concerns: Variable product quality and inadequate after-sales service
Water management risks: Low operational costs may incentivize groundwater over-extraction
Deepening water tables: Retrofitting for deeper borewells is technically and financially demanding
Maintenance costs: Repair expenses of ₹10,000-35,000 per pump discourage adoption

Regulatory and Administrative Hurdles

Land aggregation issues: Difficulty in securing multiple contiguous 5+ acre parcels for Component A. It is an execution nightmare to handle multiple such land parcels.
Lack of coordination: Poor synchronization between implementing agencies and government departments
Slow approvals: Complex clearance processes including forest and tree-cutting permissions
Feeder separation delays: Mixed feeders require costly separation before solarization
Awareness gaps: Limited farmer knowledge about scheme benefits and application procedures
Capacity constraints: Uneven state-level execution capability

Structural Issues

Cheap conventional electricity: Subsidized grid power reduces incentive to switch
Component A challenges: Low discovered tariffs and financing bottlenecks limit bankability
Business model ambiguity: Confusion about optimal implementation approach (CAPEX vs RESCO)
Diesel replacement paradox: While targeting diesel pumps, many farmers already use subsidized electricity

Bidding Strategy for Developers

Competitive Tariff Discovery

Recent auctions show tariff convergence around ₹2.70-3.10 per kWh, with variations based on:

State-specific solar irradiation levels
Evacuation infrastructure costs
Land acquisition expenses
State regulatory environment
Competition intensity

Key Success Factors

Aggressive land banking: Securing prime agricultural land near substations (within 5 km)
DISCOM relationships: Strong partnerships with state electricity companies
Financial engineering: Accessing low-cost debt through Agri Infrastructure Fund
Technical optimization: Design standardization to reduce costs
Local presence: Establishing district-level operations for faster execution
Consortium approach: Partnering for large-scale projects (Component C FLS)

Risk Mitigation

Payment security mechanisms: Ensuring CFA release timelines are protected
Warranty extension: 10-year comprehensive coverage to reduce maintenance uncertainties
Capacity bundling: Submitting bids across multiple substations to diversify risk
Remote monitoring: AI-powered systems for predictive maintenance
Module cleaning automation: Robotic technologies for water-scarce regions

Why KUSUM Projects Are Being Tendered Out

The shift toward tendering, particularly for Component C feeder-level solarization, reflects several strategic considerations:

Discom Challenges

Subsidy burden reduction: Agricultural power subsidies create massive financial strain on DISCOMs
Peak demand management: Solar generation aligns with daytime agricultural load
Technical expertise gaps: DISCOMs lack in-house capability for large-scale solar deployment
Capital constraints: Limited DISCOM budgets necessitate private sector participation

Policy Evolution

Scalability requirements: Meeting 34,800 MW targets requires private sector efficiency
Competitive pricing: Tendering drives down tariffs through market competition
Risk transfer: Private developers assume construction and operational risks
Quality assurance: Professional EPC players ensure better project outcomes

Component C FLS Advantages

Feeder-level solarization has emerged as the most critical component because it:

Provides reliable daytime power to entire agricultural communities
Reduces transmission losses through localized generation
Enables surplus power export to adjacent feeders
Improves voltage profiles and grid stability
Offers scale economies compared to individual pump solarization

RESCO Model Benefits

The Renewable Energy Service Company approach allows:

Farmers to receive solar power at subsidized rates without capital investment
Developers to recover costs through long-term PPAs
States to leverage VGF (Viability Gap Funding) for affordability
Risk allocation between public and private sectors

SWOT Analysis

Strengths

Strong policy framework: Comprehensive guidelines with clear subsidy structures
Multi-stakeholder inclusion: Enables participation by farmers, cooperatives, FPOs, and developers
Long-term revenue certainty: 25-year PPAs provide stable income streams
Environmental benefits: Significant CO2 emission reduction and diesel substitution
Energy security: Reduces farmer dependence on erratic grid supply
Income enhancement: Multiple revenue streams through power generation and land leasing
Government commitment: Consistent budget allocations (₹2,600 crore in FY 2025-26)
Scalable model: Replicable across India’s 30 million agricultural pumps

Weaknesses

Slow implementation: Only 25-30% target achievement despite 5+ years
Component A underperformance: Less than 7% completion due to financing issues
High farmer contribution: 40% share creates adoption barriers
Limited pump variety: Inadequate product range for diverse farmer needs
State capacity variations: Uneven implementation across different states
Awareness deficit: Many eligible farmers unaware of scheme benefits
Maintenance concerns: Inadequate after-sales service infrastructure
Water governance gaps: Insufficient safeguards against groundwater over-extraction

Opportunities

PM-KUSUM 2.0: Government planning successor program with refined design
Agri Infrastructure Fund integration: Component A projects now eligible for concessional credit
Agro-photovoltaic models: Elevated structures enable dual land use for farming and power
International expansion: ISA collaboration to extend scheme to Africa and island nations
Technology advancement: AI monitoring, robotic cleaning, and efficiency improvements
State-specific customization: Tailored approaches for regional needs (e.g., Karnataka microgrids)
Green hydrogen pilots: Integration with emerging hydrogen economy
Skill development: Rural employment through training programs
Private sector innovation: Competition driving cost reduction and service quality

Threats

Groundwater depletion: Solar pumps may accelerate unsustainable extraction
Grid stability concerns: Large-scale solar injection requires careful management
Policy uncertainty: Changes in subsidy structure or DCR requirements
DISCOM financial health: Payment delays and inability to honor PPAs
Land acquisition conflicts: Competing uses for agricultural land
Technology obsolescence: Rapid solar sector evolution may strand assets
Climatic variability: Below-expected irradiation affects returns
Market saturation: Aggressive capacity addition may depress tariffs
Import dependency: Insufficient domestic manufacturing despite ALMM
Bureaucratic delays: Slow approvals derail project timelines

Recommendations for Success

For Policy Makers

Simplify approvals through single-window clearances
Enable DISCOMs to release CFA upfront and collect later from MNRE
Increase central assistance for states with low fiscal capacity
Mandate micro-irrigation coupling to prevent water over-extraction
Establish robust remote monitoring and grievance redressal systems

For Developers

Getting access to multiple land banks which are free from local issues
Liaison with the local DISCOM
Focus on Component C FLS for scale and stability
Build strong state agency relationships for project pipeline
Invest in district-level execution teams with local knowledge
Standardize designs to reduce costs and improve margins
Offer comprehensive O&M packages with extended warranties

For Farmers

Form cooperatives to achieve scale economies and negotiate with developers
Leverage bank financing to minimize upfront costs
Prioritize water-efficient irrigation technologies
Understand long-term benefits beyond immediate costs
Engage with reputable vendors ensuring quality and service

Conclusion

PM-KUSUM represents a transformative opportunity for India’s agricultural sector, combining energy security, income enhancement, and environmental sustainability. With over 10,203 MW installed and 20+ lakh farmers benefited, the scheme has demonstrated proof of concept. However, achieving the 34,800 MW target requires addressing systemic challenges around financing, coordination, awareness, and water governance.

The upcoming PM-KUSUM 2.0 offers a critical opportunity to incorporate learnings from the first phase. The emphasis on feeder-level solarization, private sector participation through tendering, and innovative models like agro-photovoltaics points toward a more mature implementation framework. For developers, the 12-16% IRR potential, backed by 25-year PPAs and government subsidies, makes these projects attractive despite execution challenges.

As India pursues its renewable energy targets and aims to support its 140 million+ farmers, PM-KUSUM will remain a cornerstone policy. Success will depend on seamless coordination between central and state governments, adequate financing mechanisms, robust technical support, and most importantly, ensuring that the scheme truly serves the long-term interests of India’s farming community while preserving precious groundwater resources.