By Arunabha Ghosh and Shalu Agrawal
Earlier this year, Maharashtra announced plans to replace half a million electric pumps with solar-powered agriculture pumps over the next five years. Deployment will begin this December. Other states, including Andhra Pradesh, Bihar, Gujarat, Karnataka, Rajasthan and Telangana, have ongoing programmes or have planned similar steps. The central government wants to give capital subsidies for 100,000 solar pumps in five years. As India takes steps towards the solarisation of agriculture, three important questions need to be answered. What is the potential of solar-based irrigation? Are there cost-effective ways to increase deployment? And, what potential downsides need to be mitigated?
Indian agriculture is both under-irrigated (net irrigated area is only 45 per cent) and over-irrigated (more than 60 per cent of irrigation is now from groundwater). A severe groundwater crisis is looming in several states even as millions of farmers remain vulnerable to the vagaries of the monsoon. The recently launched Pradhan Mantri Krishi Sinchai Yojana (PMKSY) aims to give assured water to all cultivable areas. However, it has become increasingly challenging to provide affordable irrigation services through conventional technologies, both from fiscal and environmental perspectives.
India has 19 million electric pumps, reportedly accounting for 22 per cent of power sales (against eight per cent of power revenues). The agriculture power subsidy burden was close to Rs 67,000 crore ($10 billion) in 2013-14 and has been rising steadily. Despite such high government expenditures, farmers have to contend with unreliable and poor quality power supply. On this account and due to long wait times for new connections, more than 9 million diesel pumpsets are also being used in India, which are both expensive to run and environmentally hazardous.
Solar pumps could help fill irrigation gaps, mitigate greenhouse gas emissions and help farmers adapt to climate change impacts. Pumpsets (from 0.5 horsepower to 20 HP) could be used for irrigation depending on the farm size, cropping pattern and groundwater levels. The potential is immense. Even if only 15 per cent of India’s pumpsets were converted to solar, it would be equivalent to adding nearly 20 gigawatts of solar capacity (assuming an average pump size of five HP). Five million solar pumps could save 23 billion units of electricity or 10 billion litres of diesel and 26 million tonnes of carbon dioxide annually.
But high upfront costs impede deployment. Solar pumps roughly cost around Rs 100,000 per HP, almost 10 times costlier than diesel or electric pumps. Central and state subsidies as high as 90 per cent of the capital cost are offered. Such a high subsidy rate would be fiscally unsustainable if solar pumps had to be deployed at scale. Is a budget neutral strategy possible?
State governments bear significant expenses on awarding and servicing agricultural connections. On ground experience suggests that a solar panel would function well for 15 years. In the same time period, the subsidy on every new electric five HP connection would be about Rs 230,000 (net present value). The expenses include initial connection costs and recurring power subsidies. This amount is sufficient to subsidise the capital cost of a solar pump by up to 45 per cent. In states with close to zero power tariffs and/or higher connection costs, capital subsidies as high as 60 per cent could be provided. So, instead of subsidising electric pumps, state governments could divert the same resources as upfront solar pump subsidies. They could provide capital subsidies or interest rate subsidies or both to encourage the uptake of solar pumps on a large scale.
Despite government support, would farmers invest in solar pumps? This would depend on the cost of alternatives for farmers who have to wait for years to get agriculture connections. Alternatives include investing in tatkal connections (about Rs 1-1.5 lakh), using diesel pumps (about Rs 70,000 annual operational costs), or simply depending on rains (with low crop productivity). Such opportunity costs associated with the choice of electric pumps, set against the benefits of assured irrigation, could make solar pumps attractive.
Still, multiple challenges remain. First, how to make solar pumps finanically accessible to small and marginal farmers? Innovative financial products and new business models are needed. For instance, Claro Energy is provides “irrigation as service” by renting out mobile solar pumps to farmers. Besides, solar pumps combined with micro-irrigation could potentially lower total system costs (by reducing water demand and, hence, pump size and costs).
Secondly, there are concerns around over-exploitation of groundwater, if pumps have zero or low operational costs. Technical solutions are needed for remote monitoring and pump control (ABB is developing a mobile application for the same) or integrating with soil moisture sensors. Other solutions that could be explored include tying the subsidies for solar pumps to micro-irrigation and water harvesting or even integrating with the grid (along with net metering). Such measures could reduce water consumption or give farmers an alternative source of income.
Thirdly, with limited market penetration currently, spurious and poor quality products could adversely affect consumer confidence. Quality controls and performance benchmarks are urgently needed, allowing competent manufacturers and service providers to compete.
All of the above solutions need further research and pilot testing. Yet, solar pumps offer dividends for three flagship programmes: PMKSY, 100 GW of solar energy, and “Make in India”. If deployed and scaled up, with appropriate financial incentives, farmers’ training, improved irrigation practices and groundwater monitoring, they could become cost-effective solutions for sustainable irrigation in India.
The above column was published in the print edition of Business Standard on 18 August 2015.