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Latest CEEW Policy Brief: Solar Pumps for Sustainable Irrigation
2 Sep 2015

Rising demand for food, stressed water resources and poor water use efficiency in agriculture coupled with fiscally unsustainable subsidies, call for a need to rethink the approaches adopted to facilitate irrigation services in India. It has become increasingly challenging to facilitate affordable irrigation service through conventional irrigation technologies, from both fiscal and environmental perspectives.

With this backdrop, solar pumps are increasingly been seen as an alternative irrigation technology and are being promoted through the provision of high upfront subsidy on their capital costs. However, the current incentive strategy would not be amenable to scale up due to fiscal constraints. This study asks: Are there budget neutral opportunities to incentivise solar pumps, such that they can be scaled up without challenging the fiscal limits?

Key findings of the study

  • In order to facilitate affordable irrigation through ground water sources, state governments bear significant expenses as subsidy on both initial connection costs and recurring power consumption during pumping. State governments typically incur ~INR 2,27,000 (USD 3,783) on every new agriculture connection (average 5 horsepower size), over a 15 year period (NPV basis). This subsidy could range from INR 3,13,000 (USD 5,217) to INR 1,50,000 (USD 2,500), across the states, depending upon power tariffs and collection efficiencies for agriculture sector.
  • Scaling up the deployment of solar pumps through incentives such as capital subsidy would need high fiscal expenditure. In order to increase the penetration of solar pumps from the current 0.04% to 1% (of total pump sets in the country), 0.3 million units would need to be deployed, requiring subsidies of the order of INR 7,500 crore (USD 1.25 billion).
  • Can the government promote solar pumps without incurring additional fiscal expenditure? The state governments could incentivise solar pumps in lieu of awarding new agriculture connections, to the extent of the expenses, which it will likely incur on the latter. Such a budget neutral approach would enable them to subsidise capital cost of solar pumps by up to 63%, 45% and 23% in states with high, moderate and low levels of agriculture power subsidy, respectively
  • How does the choice between a solar pump and an electric pump play out for the farmer? In the current scenario of high subsidies on power for agriculture, despite a subsidy on solar pumps, farmers might still find electric pumps more economic than using solar pumps. However, high waiting time for new connections, poor quality of agricultural power supply and the costs associated with both could tilt the balance in favour of solar pumps.
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