How Crowdfunding Can Fill The Finance Gap For Farmers To Go Solar

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Crowd finance loans are a viable solution for enabling farmers to get solar-powered pumps, which bring long-term savings on electricity & diesel costs, facilitate sustainable farming and ultimately reduce farm power subsidy bills, say experts
Jency Samuel Update: 2022-03-30 00:30 GMT

Chennai: Frustrated with erratic power supply and voltage fluctuations that occasionally damaged his electric irrigation pump, P. Bhaskaran, a farmer in north-central Tamil Nadu's Salem district, took an institutional loan and installed a solar-powered pump in 2013. The solar pump fulfils his irrigation needs satisfactorily. "However, with two crop failures and a high loan interest rate, I ultimately paid nearly double the cost of the solar pump," he told IndiaSpend. "It took me eight years to clear the loan."

Bhaskaran's fellow farmers often use diesel-powered agricultural irrigation pumps because of unreliable electricity supply. They too wish to switch to solar pumps, which have low operational and maintenance costs, and unlike diesel are a source of clean, renewable energy. The cost, however, is proving a barrier, they told us. With an agricultural household getting an average monthly income of Rs 10,218 and having an average debt of Rs 74,121, the farmers said that they could not afford a solar pump that costs between Rs 2.42 lakh and Rs 4.59 lakh depending on the capacity of the pump.
Both the state and Union governments provide subsidies of a minimum of 30%, each, towards the cost of installing solar pumps for agriculture; the farmers have to pay the rest. Some state governments, like Tamil Nadu's, provide a subsidy greater than 30%. Even so, Bhaskaran's fellow farmers say it is difficult for them to finance their share if they manage to get a subsidised pump. Around 92% of farmers in Tamil Nadu are marginal or small, i.e. they own less than 2 hectares (about 5 acres) of land; all-India, 88% of farmers are marginal or small. The wait for a subsidised pump could extend into years since the demand is much more than the allocation, they said.
Buying a solar pump outright is difficult, many farmers told us, as neither banks nor microfinance institutions give loans for assets like solar pumps. While buying solar pumps with farm loans is an option, these require collateral which most farmers said is also difficult to provide, since they have already pledged any asset of value.
Alternative funding models like crowd-financed loans through peer-to-peer platforms (P2P) can fill the financing gap, farm input financing operators told us. The crowd financing model has already been proven in Europe, and with a rooftop solar project in Delhi, and should be further facilitated by the Reserve Bank of India. With many people and investors interested in farmers' welfare, the crowdfunding model for loans could address both the cost barrier for farmers to own their own solar pumps and the financial burden of subsidies on both solar pumps and farm power on governments, said, experts.
Solar irrigation pumps are a non-polluting alternative to diesel
Most agricultural irrigation pump sets in use in India are electric, but farmers in most states experience erratic power, especially during the day, and get proper supply only at night, said Bhaskaran. This fact was borne out by former Gujarat chief minister Vijay Rupani's reported statement in January 2021 that farmers were demanding daytime power as irrigating at night was risky.
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