Interview: Financing, land, and execution lessons from Infisol on Kusum C

In a recent podcast on the Electricity Market in India YouTube channel, host Shivani Singh (Power Peak Digest), alongside co-host Mr. Rajib Roy Choudhury, interviewed Mr. Raman Ladda, Director at Infisol Energy, to delve into the transformative potential of the PM-KUSUM scheme, with a focus on Component C.

Infisol Energy is a solar EPC (engineering, procurement, and construction) firm that has commissioned over 50 MW of Component C projects and is currently executing another 100 MW, with a strong pipeline of over 300 MW across Maharashtra, Andhra Pradesh, Madhya Pradesh, and Karnataka. Its reputation for land aggregation, discom coordination, and bankable project execution makes it a reliable player in this space.

PM-KUSUM is structured to involve multiple stakeholders, including farmers, EPC companies, discoms, and investors. The aim is inclusive growth through decentralised renewable energy. Farmers are central to this ecosystem. With most agricultural holdings in India limited to 2 to 4 acres, income vulnerability is high due to climate-related disruptions. PM-KUSUM offers farmers an opportunity to lease unused land to developers or, where financially viable, to invest in solar projects with institutional financing support.

Mr. Ladda explained that utilities also benefit significantly. He cited the example of Maharashtra, where PM-KUSUM’s lower tariffs are expected to save the state government Rs 70 billion annually. With solar now the cheapest source of electricity, discoms are actively seeking to add feeder-level solar capacity. Additionally, small and medium EPCs are gaining new opportunities as distributed renewable energy gains traction.

In the early years, the scheme targeted individual farmers. However, due to the high capital requirements, typically Rs 40 million to Rs 50 million, uptake was limited. This prompted a shift in strategy. State governments began focusing on underutilised land and feeder loads, opening the door to utility-scale projects. Mr. Ladda noted that while Component A (0–2 MW) continues to see participation from farmers, particularly due to the 3.5 per cent interest subvention under the Agriculture Infrastructure Fund (AIF), Component C (2–10 MW) is now dominated by developers, cooperatives, and farmer-producer organisations.

The largest PM-KUSUM implementation so far has taken place in Maharashtra, with 17 GW worth of tenders floated and around 10 per cent already implemented. The most significant live opportunity today is in Madhya Pradesh, where a 14 GW tender is underway. States like Gujarat, Rajasthan, Telangana, Andhra Pradesh, and Karnataka have also issued mid-sized tenders ranging from 1 to 5 GW.

Land availability remains the biggest implementation bottleneck. Maharashtra’s success is largely due to pre-mapped substations and associated land banks. In contrast, many other states have left land acquisition to developers, which has slowed progress. Andhra Pradesh has taken a proactive approach by offering government wasteland on lease. Mr. Ladda remarked that although many states have supportive solar policies, Maharashtra’s groundwork in securing land has set it apart.

Another concern is the availability of DCR (domestic content requirement) solar modules, which are mandatory to avail subsidies under PM-KUSUM. A Rs 10.5 million per MW subsidy is offered under Component C, but recent growth in rooftop solar schemes like the Suryaghar Yojana has diverted most DCR modules toward those projects. This has caused a delay of 6 to 9 months in PM-KUSUM project timelines. Mr. Ladda stated that the 44 GW manufacturing capacity awarded under the PLI scheme could ease this bottleneck once it becomes operational.

The typical implementation process begins with the state discom assessing agricultural load and available subsidies at each substation. Based on this, an RFQ (Request for Quotation) is issued, often through ETS (Electronic Tendering System) portals. Bidders who qualify and are awarded tenders must then seek tariff approvals from the state regulatory commission, after which the PPA (power purchase agreement) process begins. Once the PPA is signed, land leasing and financing activities can begin. Developers are given an 18-month window from LOA (Letter of Award) to commissioning. Of this, land acquisition and financing generally take 3 to 4 months, while EPC execution requires around 6 months.

From a financial standpoint, a typical 5 MW Component C project costs between Rs 165 million and Rs 180 million. Mr. Ladda explained that banks are currently willing to fund up to 75 to 80 per cent of this without collateral, depending on the strength of the developer and the offtaker. Institutions such as SBI, AU Small Finance Bank, Union Bank, and Bank of India are actively financing PM-KUSUM projects. Interest rates vary between 8.5 and 10.25 per cent, with loan tenures extending up to 20 years.

Project economics appear sound. At the project level, the internal rate of return (IRR) is around 14 to 15 per cent. For the equity component, returns are estimated at 24 per cent. A 5 MW project can yield Rs 30 million in annual revenue, with minimal operation and maintenance costs. Without depreciation benefits, payback occurs in about 8 years. With accelerated depreciation, this can drop to 5.5 years.

Quality assurance is another critical issue. Mr. Ladda highlighted that most PM-KUSUM PPAs include minimum generation clauses. If output drops below a 10 per cent CUF (capacity utilisation factor), penalties or even PPA termination may occur. For this reason, developers are advised not to compromise on core components such as modules, inverters, and mounting structures. Investing in better quality equipment may increase project cost by 5 per cent, but over a 25-year project life, the additional payback time is just six months.

The discussion also addressed broader industry trends. Discoms are becoming more aggressive in solar procurement, especially as power prices on the Indian Energy Exchange (IEX) continue to fall. The shift away from standalone C&I (commercial and industrial) solar systems toward utility-scale solar was described as inevitable. Mr. Ladda warned that C&I assets could become stranded if policy and banking rules shift unfavourably. He advised EPC players focused on C&I to diversify toward government-led tender opportunities like PM-KUSUM.

Finally, the conversation turned to new entrants. Mr. Ladda encouraged first-time developers to understand the scheme deeply before investing. The opportunity is significant, but success depends on knowing the risks, regulatory pathways, and technical requirements. Many investors in Component C are new to the power sector, and nearly all have received subsidies and begun recognising revenues.

As state governments continue to digitise approvals and streamline execution processes, PM-KUSUM Component C offers a scalable, financially viable model for solar deployment in rural India. The next 12 to 24 months will be crucial in determining how effectively EPCs and developers can align their business models to take advantage of it.