Energy

Delhi government’s Agriculture-cum-Solar scheme a non-starter

The scheme, which attempts to increase solar installations while consequently providing relief to Delhi’s agricultural sector, offers very little for any of the stakeholders involved other than well-off, large landowning farmers

 
By Priya Sreenivasan
Last Updated: Thursday 02 August 2018
Credit: Rajan Kalsotra
Credit: Rajan Kalsotra Credit: Rajan Kalsotra

The Delhi government’s Mukhyamantri Agriculture-cum-Solar Scheme, laid out in the budget earlier this year, has received cabinet approval.

The scheme aims to hit two birds with one stone by attempting to increase solar installations while providing relief to Delhi’s agricultural sector at the same time.

Broadly, the scheme’s aim is to entice solar developers to build power generating plants on agricultural holdings. The farmers are to be paid Rs 1lakh/acre by the developers for leasing the land, with a 6 per cent annual escalation.

The premise of the scheme is to supplement farmers’ income, currently estimated at Rs 20,000– 30,000/acre.  Additionally, they are allowed 1000kWh/acre of free electricity generated by the system.

While the purported economics look great for farmers on paper, the math doesn’t add up.

According to the Economic Survey of Delhi 2017-18, the total land area under cultivation stood at 34,750 hectares i.e. 85,870 acres. There is a caveat that caps the maximum land usage of this scheme at 1/3rd of the total availability, so as to not interfere with agricultural output, as a result of which only 28,337 acres are available.

Going by the assumption that all the stipulated conditions were met, it is theoretically possible to install 4.3GW, far surpassing the 1GW by 2020 target set in the Delhi Solar 2016 policy.

Total agricultural land in Delhi (as of 2015)

Land that can be used, accounting for the 1/3rd maximum usage cap

Total capacity installation possible (1MW = 6 acres)

Total generation

Total free electricity available for farmers

85,750 acres

28,337 acres

4,700MW

6130MU

4.7MU

Theory aside, ground realities throw a spanner into the works.

For one, the agricultural landholding is fragmented around the city. Over 77 per cent of the holdings belong to small and marginal farmers, who own less than 4 acres each at best. Secondly, a very small portion of Delhi’s population (0.71 per cent i.e. 39,457 people, according to the Economic Survey) is engaged in agricultural employment. Within this already small group, it is unclear how many of them are landowners. It is likely that a significant fraction is contract labourers who will receive no benefits.

It is not just the farmers who may not be motivated to buy into the scheme. The developers are to engage with this model under the RESCO (Renewable Energy Service Company) model i.e. they build and operate the plants and earn revenue by selling the power to bulk government consumers such as the Health Department and Public Works Department. The latter are expected to sign a power purchase agreement with the developers on the grounds that they will procure power at lower tariffs, under Rs 4/kWh. This could be a win for the end consumers who pay between Rs 6-9/kWh currently and is also a potentially good deal for solar developers who are dealing with a national market that demands solar tariffs under Rs 3/kW.

However, it remains unclear how this arrangement can be made to work. The government bulk consumers may need to procure power through Open Access which enables large consumers to procure power directly from generators but is subjected to various charges by the DISCOM, transmission company etc whose infrastructure is required to get the power from point to point. This will raise the tariffs well above the Rs 4/kWh that is anticipated and touted as a saving for the Delhi government.

They may also not be able to get the lowest possible tariff due to the relatively high land costs under the scheme. The land cost at Rs 1lakh/acre is much higher than other sites. Also, the Delhi government scheme stipulates an annual escalation of 6 per cent annually. Solar parks, in comparison, have a 5 per cent escalation once every two years.

Scheme

Land required per MW of solar

Cost/MW

Escalation

Mukhyamantri Agriculture-cum-Solar Scheme

6 Acres

6 lakhs

6% annually

National Mission Solar Scheme

5 Acres

~1 lakhs

5% once every two years

A similar scheme was floated by the government of Karnataka in 2015 where farmers were encouraged to build solar plants in their land and were paid a high tariff of over Rs 8.4/kWh (the prevalent tariffs at the time were Rs 5/kWh). The scheme saw close to 300MW being installed in the state. However, in that case, the power was procured by the state-owned DISCOMS and the total ownership of the system was with one entity—the farmer.

The Delhi government has announced that the scheme will be rolled out in a few months. Perhaps the finer details prescribed in the rollout will iron out the issues. But for now, the scheme appears to offer very little for any of the stakeholders involved other than the likely well-off, large landowning farmers.

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