PM-KUSUM Component A 2026: How Farmers & Developers Can Earn from Solar Power

India’s shift towards decentralised renewable energy is opening a new opportunity for farmers, landowners and renewable energy entrepreneurs through PM-KUSUM Component A. Under this component, eligible participants can set up grid-connected renewable energy power plants and sell the electricity to DISCOMs at an approved tariff. This guide explains PM-KUSUM Component A, including its eligibility criteria, investment requirements, land and project requirements, DISCOM application process, tariff mechanism, financing options and key steps involved in setting up a project.

What is PM-KUSUM Component A?

PM-KUSUM Component A focuses on setting up decentralised, grid-connected renewable energy power plants across India. Under the scheme, individual farmers, groups of farmers, cooperatives, panchayats, Farmer Producer Organisations (FPOs) and Water User Associations (WUAs) can develop renewable energy power plants, generally in the 500 kW to 2 MW range.

The electricity generated is supplied to the local DISCOM (Distribution Company)—the electricity distribution utility responsible for supplying power to consumers in a particular area. The DISCOM purchases the electricity generated by the project at a feed-in tariff (FiT) approved by the respective State Electricity Regulatory Commission (SERC).

The scheme also provides an option for eligible landowners to partner with a renewable energy developer or DISCOM instead of arranging the project equity themselves. In such cases, the landowner receives lease rent as mutually agreed with the developer or DISCOM.

This makes Component A relevant to farmers, landowners and renewable energy developers looking to participate in decentralised power generation and create an additional income stream. (MNRE)

How Does PM-KUSUM Component A Work?

PM-KUSUM Component A follows a structured process that connects the Renewable Power Generator (RPG), solar power plant and DISCOM. First, the DISCOM identifies substations with available capacity for renewable power and notifies the capacity that can be connected to the grid. Eligible applicants then apply for the notified capacity. Depending on the number of eligible applications, the DISCOM may allot projects at a pre-fixed tariff or conduct a bidding process.

After selection, the RPG develops the renewable energy power plant and completes the required grid-connectivity arrangements. The project is connected to the designated substation, and the RPG and DISCOM enter into a Power Purchase Agreement (PPA). Under the scheme guidelines, the PPA is generally for 25 years from the Commercial Operation Date (COD), with the DISCOM purchasing the generated electricity at the applicable tariff.

How Solar Projects Create New Income Opportunities

PM-KUSUM Component A provides different earning routes depending on whether the participant develops the renewable energy project or provides land for its development.

1. Farmers & Landowners: Develop Their Own Project

Eligible farmers and landowners can participate as a Renewable Power Generator (RPG) and develop a renewable energy power plant within the permitted capacity. The RPG invests in project development, generates electricity and sells the power to the DISCOM under the applicable Power Purchase Agreement (PPA) and tariff. Revenue is generated through the sale of electricity over the PPA period.

2. Farmers & Landowners: Lease Land to a Developer

Landowners who do not want to arrange the investment for developing a power plant can lease suitable land to a renewable energy developer or DISCOM. The developer takes responsibility for developing the project, while the landowner receives lease rent as mutually agreed. This route allows landowners to participate without taking on the complete project-development investment.

3. Developers: Develop & Operate the Project

Renewable energy developers participate by developing and operating eligible projects. They arrange project development, equipment, construction, grid connectivity and other required infrastructure. The electricity generated is supplied to the DISCOM according to the applicable PPA and tariff.

The earning structure therefore depends on the chosen route: electricity sales for project owners and developers, or lease income for participating landowners.

Estimated Investment and Profitability

* The ₹4 crore/MW figure is an indicative cost cited in the official PM-KUSUM FAQ; actual project cost depends on technology, EPC pricing, land, evacuation infrastructure and state-specific requirements.

** Revenue figures are illustrative estimates, not guaranteed scheme returns. Actual revenue depends mainly on the plant's generation and the applicable FiT/PPA tariff approved by the state regulator. Component A projects generally have a 25-year PPA with the DISCOM.

Note: PM-KUSUM Component A does not provide a direct capital subsidy to the project owner. The project's financial model is primarily based on selling generated electricity to the DISCOM under the applicable PPA and tariff.

Is There a Subsidy Under PM-KUSUM Component A?

PM-KUSUM Component A follows a power-sale and PPA-based model rather than a direct capital subsidy for setting up the solar plant. The project owner or developer invests in the plant and sells the generated electricity to the DISCOM at the applicable tariff approved by the State Electricity Regulatory Commission.

Under the scheme, DISCOMs receive Procurement Based Incentive (PBI) for purchasing renewable power from eligible Component A projects. The PBI is ₹0.40 per unit purchased or ₹6.6 lakh per MW installed per year, whichever is lower, for five years from the Commercial Operation Date, subject to scheme conditions.

Therefore, farmers and developers should primarily assess the project cost, applicable tariff, PPA tenure, generation potential and financing structure when evaluating the financial viability of a Component A project.

Who Are Eligible to Participate in This Project

PM-KUSUM Component A is open to several categories of participants interested in developing decentralised renewable energy projects. Eligible participants include:

• Individual farmers
• Groups of farmers
• Farmer Producer Organisations (FPOs)
• Cooperatives
• Panchayats
• Water User Associations (WUAs)
• Renewable Energy Developers (RE Developers)

The project is generally developed in the 500 kW to 2 MW capacity range, subject to the capacity notified by the concerned DISCOM. Applicants must also meet the state-specific eligibility, land, grid-connectivity, financial and technical requirements prescribed in the relevant Component A application or tender document.

For farmers or landowners who do not want to develop the project themselves, leasing suitable land to a renewable energy developer or DISCOM provides another participation route.

Land Requirements for Component A

Land is one of the key requirements for setting up a renewable energy project under Component A. The project site should have suitable land availability, solar potential, road access and proximity to the identified substation.

The land requirement depends on the project's capacity and site design. As a general planning estimate, a 1 MW solar project requires around 4–5 acres of land, while a 500 kW project requires around 2–2.5 acres. A 2 MW project therefore requires approximately 8–10 acres.

Farmers and landowners may use their own suitable land or lease land to a renewable energy developer. However, the final land requirements, ownership/lease conditions and site specifications are determined by the concerned DISCOM and state-level Component A guidelines.

Land, Capacity & Site Requirements

PM-KUSUM Component A Application Process

The application process starts when the concerned DISCOM identifies substations with available renewable-energy capacity and invites applications or an Expression of Interest (EOI). Applicants then submit their project and land details according to the state-specific procedure.

Step-by-Step Application Process

1. Check the notified substation – Identify a substation where the DISCOM has notified available capacity.
2. Check land eligibility – Ensure the proposed land meets the location and land requirements.
3. Submit the application/EOI – Apply through the designated DISCOM or State Implementing Agency portal.
4. Submit required documents – These generally include land ownership/lease documents, identity documents, financial details and other documents specified by the state.
5. Pay applicable fees/EMD – The processing fee or EMD is determined by the concerned state/DISCOM.
6. Project selection – Eligible applicants are selected according to the applicable state/DISCOM procedure, which may involve a pre-fixed tariff or bidding.
7. Letter of Award and PPA – After selection, the applicant completes the required formalities, provides the required bank guarantee and signs the Power Purchase Agreement (PPA) with the DISCOM.
8. Set up the plant and grid connection – The selected project is developed and connected to the designated substation according to the approved technical requirements.

Submit the application/EOI – Apply through the designated DISCOM or State Implementing Agency. Applicants can check the National PM-KUSUM Portal for implementing-agency and application information.

Component A Tariff & PPA

Under Component A, the electricity generated by the renewable energy project is sold to the concerned DISCOM under a Power Purchase Agreement (PPA). The tariff is determined according to the mechanism specified by the concerned state/DISCOM and approved by the State Electricity Regulatory Commission (SERC).

The PPA provides a long-term framework for electricity procurement. Under the central scheme guidelines, the PPA period is generally 25 years from the Commercial Operation Date (COD). This long-term agreement provides project owners and developers with a defined framework for generating revenue through electricity sales. (PM-KUSUM)

Tariff and PPA: Key Factors

Financing a Solar Power Project

A solar power project requires a substantial upfront investment, so financing plays an important role in project planning. Under Component A, the project owner arranges the required funds through a combination of own capital and bank or institutional finance.

For example, a 1 MW project with an estimated project cost of around ₹4 crore may be structured using promoter equity along with term financing. The exact debt-equity ratio is decided by the lender after evaluating the project's land, grid connectivity, PPA, expected electricity generation, revenue potential and the borrower's financial profile.

How the Funding Structure Works

What Lenders Look For

Before financing a project, lenders generally examine the PPA with the DISCOM, project feasibility, land documents, grid-connectivity arrangements, promoter contribution, projected cash flow and repayment capacity.

A strong PPA, suitable project site and clear financial structure improve the project's financing profile. Applicants should therefore arrange the land, technical approvals and project documentation before approaching a lender.

Own Solar Plant vs Land Leasing

Under PM-KUSUM Component A, farmers and landowners have two practical ways to participate. The first is to develop and operate their own renewable energy project, while the second is to lease suitable land to a renewable energy developer or DISCOM.

Develop Your Own Solar Plant

Farmers with suitable land and access to project financing can develop a solar power plant and become the Renewable Power Generator (RPG). The project owner manages installation, grid connectivity, operations and maintenance, while earning revenue from electricity supplied to the DISCOM under the PPA.

Lease Land to a Developer

Landowners who prefer not to invest in plant development can lease their suitable land to an eligible developer or DISCOM. The developer handles project development and operations, while the landowner earns lease rent according to the mutually agreed terms.

The choice depends on the landowner's investment capacity, project-management involvement and preferred income model—electricity-sale revenue through project ownership or lease income through land development.

Challenges to Consider Before Investing

Before investing in a solar power project, applicants should assess a few practical factors:

• High upfront investment: Solar equipment, installation and grid infrastructure require substantial capital.
• Land and grid connectivity: Suitable land close to the designated substation is important for project feasibility.
• Approvals: The project requires compliance with DISCOM, SERC and state-level requirements.
• Financing: Loan eligibility and repayment terms directly affect project cash flow.
• Project execution: Procurement, construction, commissioning and maintenance require proper planning.
• Tariff and generation: Project returns depend on the approved tariff and actual electricity generation.

A detailed feasibility and financial assessment before investment helps establish the project's expected costs, revenue and repayment requirements.

FAQs

1. What is the target of PM-KUSUM Component A?

A. PM-KUSUM Component A has a scheme-level target of 10,000 MW through decentralised, grid-connected renewable energy plants. The programme focuses on expanding distributed renewable power generation and enabling farmers, landowners, cooperatives and other eligible participants to develop projects linked to local electricity distribution infrastructure.

2. Who purchases the electricity generated from the project?

A. The concerned DISCOM purchases the electricity generated by an eligible Component A project under the applicable Power Purchase Agreement. The purchase tariff follows the mechanism approved by the respective State Electricity Regulatory Commission, providing the project with a defined framework for selling its generated power.

3. Is Component A available across all Indian states?

A. Component A is implemented through State Implementing Agencies and DISCOMs, so participation depends on the availability of notified projects and the applicable state-level process. Applicants should check the National PM-KUSUM Portal and the latest notification issued by their concerned state or DISCOM before applying.

4. How is the tariff determined?

A. The tariff for electricity generated under Component A is determined through the applicable state/DISCOM procurement process and approved by the respective State Electricity Regulatory Commission (SERC). Depending on the state, the tariff may be pre-fixed or determined through a competitive bidding process. The applicable tariff is specified in the project notification and PPA.

Conclusion

PM-KUSUM Component A offers farmers, landowners and developers a structured opportunity to earn through decentralised renewable power generation. Before investing, assess land, substation capacity, project cost, tariff, PPA terms and financing requirements to plan the project effectively.

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