In Rajasthan alone, these savings are equivalent to more than 12.5 per cent of the state's annual agricultural power subsidy, highlighting PM-KUSUM's potential to ease pressure on state budgets.

Solar-powered irrigation can cut agricultural power subsidies, provide reliable daytime electricity, boost farmers' incomes, and create jobs, according to a new report.

The report - 'Scaling Solar Power for Irrigation in India: Lessons from PM-KUSUM' - by the Council on Energy, Environment and Water (CEEW), the Center for Study of Science, Technology and Policy (CSTEP), and the International Institute for Sustainable Development (IISD), finds that in many states, decentralised solar irrigation already costs Rs 3-4 per unit, far below utilities' Rs 6-7 per unit supply cost.

"Even modest solarisation of agricultural power demand can significantly reduce long-term subsidy burdens while delivering reliable electricity to farmers," said Anas Rahman, senior policy advisor, IISD.

"As the scheme enters its next phase, states should focus on tariff design, grid readiness, and payment security to make solar irrigation financially sustainable for both utilities and farmers."

The study focuses on Component A (small-scale grid-connected solar plants on farmers' land) and Component C-FLS (feeder-level solarisation) of Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM), India's flagship program to promote solar energy in agriculture. While the scheme has delivered clear benefits, implementation has fallen short of targets. Deployment to date stands at 8.4 per cent under Component A and 38.2 per cent under Component C-FLS.

Beyond fiscal savings, the scheme has also supported jobs and farmer incomes. Over 32,000 jobs have been created under components A and C-FLS, and farmers can earn an estimated 11 per cent-16 per cent annual return on investment by installing 0.5 MW-2 MW solar plants and selling electricity to the grid. Leasing land can generate around Rs 30,000 per acre per year.

"PM-KUSUM has moved beyond pilots to a scale-ready pipeline, with significant capacity already tendered and under development," said Shalu Agrawal, director of programmes at CEEW. "What matters now is execution-getting tariffs rights, reducing payment risk, and integrating projects smoothly into the grid. Done well, solar irrigation will become a cost-effective, mainstream solution for meeting agricultural power demand while easing subsidy pressures."

With the first phase of the scheme concluded on March 31, 2026, the report recommends a next-generation scheme that incorporates lessons learned and is flexible and investment-ready, enabling states to adapt, innovate, and tailor the scheme to local conditions.

"States have been the real drivers of innovation under PM-KUSUM," said Rishu Garg, senior policy specialist, CSTEP. "The next phase must allow states more flexibility, strengthen state implementing agencies, expand planning capacity at the distribution level, and prepare rural grids to handle decentralized solar. Without these institutional foundations, scale will remain uneven across states."

Key findings

Massive Fiscal Savings: Solarising just 10 per cent of agricultural power demand could save states like Madhya Pradesh over Rs 6,300 crore and Rajasthan over Rs 2,500 crore over 25 years.

Job Creation: Over 32,000 jobs have already been created through small-scale grid-connected plants and feeder-level solarization.

Farmer Prosperity: Farmers can see annual investment returns of 11 per cent-16 per cent by selling solar power to the grid or earn roughly Rs 30,000 per acre annually by leasing their land.

Ready for Scale: Despite implementation hurdles, a strong pipeline exists with more than 40 GW tendered in the last two years.