Karnataka Farmer’s Solar Scheme – Solar Mango Assistance in Financing Avenues for Farmers & Investors

The Karnataka farmer’s scheme, which was launched in 2015, has been one of the most attractive schemes.

It provides Rs 8.4/kWh as the tariff, one of the highest in the country, and farmers holding land in Karnataka could bid for upto 3 MW.

The scheme was so attractive that the online bidding, done on a first-come-first-served basis, concluded within one minute for the entire 300 MW!

As it happens in our movies, the first part was the positive and happy part of the story. What is happening after the  PPA has been signed by over a hundred farmers is a more challenging story (not different from the post interval theme in our movies).

What indeed is the challenge?

The real challenge is in the financial closure.

Let me explain. For a solar power plant, the total project cost has to be partly brought in as the developer’s equity, while the other part cam be covered by debt, coming in the form of loans from banks.

The debt/equity ratio for a solar power plant will be about 30:70 (30% equity and 70% debt). In some cases, it can go as much as 25:75, but let us stick to 30:70 for our discussions here.

Given that a MW of solar Power Plant costs about Rs 6 crores (including all project costs), a farmer with a 1 MW PPA needs to be able to be able bring in Rs 1.8 crores as equity and show collateral for Rs 4.2 crores (or at least about Rs 3 crores) for the bank loan.

Not suprisingly, many Karnataka farmers have not been able to raise the equity or debt. Some of my folks own land and property in my village, and I am aware that some farmers out there are indeed wealthy, but only a few of them will be able to show wealth of Rs 5 crores (required for equity and collateral together, for a MW).

With this as the context, a good number of farmers who have signed these attractive PPAs are not able to bring in either the equity for the project as they do not possess enough money on their own, nor raise a bank loan as they are not able to provide the collateral the banks need for loans for solar power projects.

Not sure what they had in mind for financing when they signed the PPA, but now with the entire thing becoming thicker by the day, they have surely started getting their minds to think.

Solar Mango is aware of many of these farmers trying out various methods to get financial closure, some of them fairly unorganized ones. Not surprisingly, only a few have succeeded in getting financial closure.

And now, the clock has started ticking as they need to complete their projects by the end of 2016. If they do not get a financial closure within the next couple of months, they will find it difficult to complete their projects on time.

With just 10 months to go, dozens of farmers holding an attractive PPA are in a quandary.

This challenging situation for the farmers is creating an opportunity for some investors. How?

The real opportunity the investors see is the tariff.  At Rs 8.4/kWh, your project and equity IRRs are sky high, with the capex / MW significantly less than Rs 6 crores (without trackers). For one our clients who has this PPA and is lucky (wealthy) enough to get a financial closure on his own, we did the math and found that with trackers, Project IRRs are around 22%. Mind you, these are withp conservative or at least acceptable assumptions on interest rate (12%), capex (6.2 crores/MW, excluding other upfront costs such as costs for approvals, interest during construction etc), and yield (19 lacs/MW/year).

This implies that, even assuming an investor shells out an equivalent of Rs 1 crore /MW as a premium (either in capex or through revenue sharing), he ends up with a 25 year project that has a project IRR of over 18%! (once again, these are estimates for projects with trackers, and without trackers it might be about 2% less on IRR, still very attractive).

Let us say I have convinced the prospective investor that it is indeed a great tariff, but he is going to ask, “How can I participate as this PPA has been signed and owned by the farmer?”

While the PPA has been signed by the farmer, the agreement allows ownership of the PPA to be fully transferred to third parties after the first year. Thus, if you are investor looking for a good PPA (and Rs 8.4/kWh is as good as it will ever get anymore in India), you could be mighty interested in talking to the farmers now. From what Solar Mango has estimated, even after the financial incentives the investor need to give to the farmer for getting this opportunity, the returns to the investor could be quite attractive, given the high tariff for the scheme (Rs 8.4/kWh)

The next question that pops up from a prospective investor is: “Is it a good idea to invest now, as I cannot claim ownership at least for a year from the start of operations?”

Well, the ownership issue might not be such a problem after all. The reason is, according to the PPA agreement, the farmer has to own a only minimum of 26% share in the special purpose vehicle even in the first year. Thus, as an investor, you could actually start part owning the power plant right from the start, and own it fully after a year.

Is it any wonder that at Solar Mango we are getting a few calls every day from prospective investors keen on investing in this scheme? Sure, the nature of the PPA does present some challenges, but I know of investors who have already invested in a few MW of this scheme through well crafted agreements.

But, while it indeed is an attractive opportunity, because of the unorganized nature of this market, both from the investors and the farmers contexts, many investors are not able to talk directly to farmers directly, and many farmers keen on high quality investors are not able to identify them.

In fact, a few investors we interacted with are quite concerned about some farmers demanding unacceptable amounts as premium. These investors are also kind of put off by the “unprofessional” attitude of some farmers who essentially seemed to say “put down your money on the table and we will talk” – surely not the way you should ask for money from professional investors! Another challenge seems to be the presence of so many brokers and aggregators, some of whom are not even allowing access to talk to the farmers they represent – I can assure them no professional investor would be interested in talking to them either, if this attitude persists.

For some of the same reasons noted above, we at Solar Mango were also unsure whether we should try to play a role in assisting the farmers to find investors. And for a while, we actually decided not to. But in the past two weeks, we have had some of the better farmers enquiring if we could help, and we said, why the heck not.

Well, let me admit that the situation is fluid, but at Solar Mango we have formed a small team to focus on this and help both the investor and the farmer. Our focus is to identify some really serious farmers who are willing to approach this in a professional, positive manner with a win-win mindset. 

So, here’s the nub:

  • If you are an investor interested in exploring investing opportunities in the Karnataka Farmer’s scheme or in other attractive solar power plant opportunities,
  • Or a farmer who owns a PPA and is seeking a high quality investor

Solar Mango can be of assistance in connecting you with serious farmers/investors: Do send a note to Ramya – ramya@solarmango.com .

Please note that we are keen on interacting directly with farmers only, and hence middlemen/aggregators may kindly excuse.


Other web resources from Solar Mango

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81 thoughts on “Karnataka Farmer’s Solar Scheme – Solar Mango Assistance in Financing Avenues for Farmers & Investors

  1. Rajesh Lohia

    We want to be in solar industry either in mfg or trading,,, we have done sub contracting for a company for solar pump projects in rajasthan,,, though we are trying to empanel ourselves for MNRE ,,Nabard solar pumping programmme,we are also thinking of entering into solar manufacturing sector,, should we go to panel manufacturing or some other items,,, we want guidance for that.

    How you can help us

    1. Narasimhan Santhanam Post author

      Dear Rajesh

      Many thanks for your kind enquiry and thanks indeed for thinking of Solar Mango

      I feel that our consulting team will be able to assist you in understanding the solar market and its opportunities much better – this is one of our core areas of expertise, and we had done it for clients both small and large

      I request you to send a note to Ramya (ramya@solarmango.com ) and kindly provide your contact details in that email so that she can call you, understand your needs better and take it to the next stage.

      I thank you very much once again for your interest and enquiry, and all the best for your efforts into solar

      Solar Mango

  2. Shivashankrappa

    When the scheme is clean Syed within one minute, do you believe these are genuine farmers. Some thing is not right here.

  3. Shivashankrappa

    When the scheme is cleosed within one minute, do you believe these are genuine farmers. Some thing is not right here.

    1. Narasimhan Santhanam Post author

      Dear Sir

      Thanks for the note

      I am aware that many share your scepticism.

      All I can tell you is that the few farmers with high net worth we are working with for their project management certainly did their home work, sat in front of their PCs at the right time and did the right thing.

      I am not however aware what % of the total number of farmers who got allotments belong to this category

      Thanks for raising this, take care

      1. Rajveer

        Respected Dear madam Im Rajveer from Gulbarga district Jewargi taluk Karnataka state

        Madam I have more than 48 acres land and
        i m interested to give rent basics on solar power plant projects plz I need your and your company help

        Thanking you
        By Rajveer

  4. Paul Ponniah

    Thank you for the refreshing article about the use and benefits of solar power as a means of earning and the pride for the country to stand out as a nation of power producers, reducing the demands for a more comfortable life for all specially for the farmers.

    1. Narasimhan Santhanam Post author

      Dear sir

      Many thanks for your kind and appreciative comments

      I am hoping that Solar Mango is able to provide at least some help to the various stakeholders in the solar power sector, and farmers are emerging as an interesting stakeholder segment

      Thanks once again for your appreciation, take care

  5. rohin

    Narsi – Everyone knows what happened here – ref ur comment below- and thats why no serious investor wants to take a risk .

    The scheme was so attractive that the online bidding, done on a first cum first served basis, concluded within 1 minute for the entire 300 MW!

    1. Narasimhan Santhanam Post author

      Agreed Rohin, many investors are indeed cautious…and for the right reasons.

      But as I have Pointed out in my response to Shivashankrappa above, there are also genuinely good folks who have got the PPA who would want investors. The challenge right now is to identify these alone and work with them.

      A couple of such folks have approached us and we already have connected them with serious investors. Quite a few others who approached did not “Pass the test” so to say.

      We had a pretty tough time with some of the aggregators and “brokers” because it was difficult to understand how genuine who they represented were, and as a result, we decided not to waste our time with any of these indirect sources, and we only interact directly with farmers in the past one month,

      I do however agree with you that the whole process could have been thought out much better by the Karnataka government. The current situation, where a number of PPA holders cannot get financial closure, could have been avoided

      Thanks once again for taking time to comment, all the best

    1. Narasimhan Santhanam Post author

      Dear Mr Konery

      I am in full agreement

      The government should have thought about this, and if they had wanted to assist “farmers in need,” they should have thought up a financial assistance scheme for them before they launched this.

      At the same time, do note that the structure of the PPA where the farmer can invite an outside investor to hold 74% indirectly does assist the farmer in finding financial investors. It is just that this has become fairly messy and unorganized right now – something Solar Mango is trying to solve, at least for select farmers.

      Thank you once again for taking time to provide your insights, all the best!

  6. Sudharshan Bogi

    Good article without any new thing in it. There are invetors if the farmers can dirctly approach them. These PPA owners almost 90% are the land bankers who are very greedy. If the PPA holders are real farmers, the financial closure could have happened long back and half of the policy would have been executed. The PPA holders are greedy and some are for one time sale. All these land bankers are rich and looking for huge profits without investing a single rupee.

    Hence we can analyse why the delays. We are ready to invest 100%, but the farmers are asking for 2 rupees on grass revenue which is not at all viable in the initial years where the investor has to bring the project cost in debt/equity ratio. Hope the power ministry in the state understand this problem and help the investors who are willing to invest 100% and operate for 25 years by sharing a reasonable revenue with the farmers.

    1. Narasimhan Santhanam Post author

      Dear Sudharshan

      Many thanks for your inputs

      As I have mentioned in responses to some of the earlier comments, many parts of what you are saying are right on the dot. Some farmers are indeed being very unreasonable, and I foresee them going through some serious turbulence if they do not have money on their own. They do not appreciate that if they want good and professional investors, they also need to behave well and professionally!

      One point where I might not agree fully is your statement that all farmers have the money themselves. True in some, but not all, cases. Some of the farmers who we are working with genuinely cannot bring in their own equity and collateral, at least not fully. You might ask how the government allowed them to get the PPA in the first place, but well, this is fait accompli so there is no point discussing that.

      All we are trying to do at Solar Mango is to work with a few select farmers who we feel have integrity and are professional and try finding good investors for them. Right now, I would not say we have too many in our list, but that is also because we are fairly selective and do not wish to waste our time in such a chaotic market,

      Many thanks once again for taking time to comment and provide your insight

      All the best!

  7. Vivek Balachander S

    Dear Narasimhan,

    An insightful article encouraging investors, but some of the grey areas are reaching an agreement between the farmer and investor and how much financial incentives must be given to the farmer ? future conflicts if farmer perceives that the compensation given to him/her is not adequate. Although the scheme is a prospective one it has few loopholes which can be exploited.
    If farmer is allowed to own only 26% of the share(which would be in most of the cases due to lack of capital), wouldn’t it allow investors to have greater control over the plant and farmer’s position would be undermined in his own land ?

    1. Narasimhan Santhanam Post author

      Dear Vivek

      Many thanks for your kind comment.

      Well, I think the only way future conflicts can be avoided is if it is a water-tight legal agreement.

      As the farmer can sell his entire stake after the 1st year, I think it would be advisable for most investors to use this option and own the power plant in its entirety after the first year. Yes, this will mean that the farmer does not own the power plant, but from what I understand, the land has to be in the farmer’s name, so I guess one way would be to lease the land to the investor.

      All these beg the question whether this is a farmer’s scheme at all – well, it is not my job to impute motivations. We at Solar Mango are more interested in assisting those farmers who are willing to work towards a win-win for all stakeholders.

      I think if the government genuinely wishes to have farmer’s schemes, it should have thought of the financial angle right in the beginning and organized something for it, so that it does not become a chaotic market as it has right now.

    1. Narasimhan Santhanam Post author

      Dear Narayan

      Many thanks for your interest and comment

      I have already mentioned some estimates for project IRR in my blog post above.

      Going further, all I can say is, a tariff of Rs 8.4/kWh is an excellent tariff that will give you reasonable returns even if your capital cost is Rs 8 crores/MW – Rs 2.5 crores higher than what it is right now. You can figure out the rest, I am sure

      Thanks once again for your enquiry

  8. Niranjan Gowda

    Dear Sir

    Thank you for this interesting post and the assistance provided by Solar Mango for the farmers

    I would like to know the time available for this project to be completed and whether a company investing in this now will have enough time to implement the project before the deadline.

    Thank you and advance thanks

    1. Narasimhan Santhanam Post author

      Dear Niranjan

      Many thanks for your query

      The deadline for the power plant to be completed is December 2016.

      A new investor needs to be aware of the following timelines/durations:

      1. It could take 2-4 months for financial closure
      2. It will take a minimum of 3 months and likely 4 months for completing the solar power plant installation – note that the construction can start only after the financial closure

      The above two are the main two activities that could take time – many aspects such as approvals can be subsumed within the project installation duration.

      It thus could take upto 8 months from the time the investor gets in. You have about 10 months from now for Dec end.

      Let’s say a new investor JUST ENOUGH time to get in and get things done

      Many thanks once again for asking, all the best!

    1. Narasimhan Santhanam Post author

      Thanks Shravan for your interest.

      Just to set the expectations right, at the moment there are too many good investors keen on this, the challenge seems to identify farmers who wish to deal with investors in a professional, transparent manner!

    1. Narasimhan Santhanam Post author

      Dear Kamal

      As it has been mentioned above, Punjab also has a similar farmer’s scheme, though I am not clear about the stage of implementation – things dont seem to be too transparent there!

  9. abhi

    Hi, Pls give your clarification on the following:-
    Q1. Bank will give funds to developer as the PPA and Land both are in the name of owner only.
    Q2. In most of the cases third person I.e lease holders have taken PPA in his name however he is not the owner of land, and lease can be given for agriculture purpose only otherwise conversion is req. which can be done thru owner only. Lease holder can sign the agreement with developer?

  10. KUMAR

    This is Kumar from Bangalore. I wish to bring into your notice that our family has signed for a 5 MW SRTPV in karnataka @ Rs:: 9.56/.
    Land is clear marketable titles and PPA signed in the month of Jan 2016.
    We are looking for serious investors who can invest on this project.

    Thanks in advance.

    1. Mutturaj

      Hi Kumar u got any investors….
      Since we are also in need of investors…
      U have come across any investors please let us know.
      Thanks in advance…

    2. Manasi

      Hello Mr. Kumar

      We have serious investors for taking up your project.
      Please give your offer to our email.
      Please confirm whether your project is on rooftop.

      With regards

  11. Raghuram Reddy


    An overseas investor is desperate in Karnataka-Farmer PPA projects (INR 8.40/unit)

    Interested PPA holders and genuine agencies with mandate/MOU signed with the PPA holder are welcome.

  12. Ratnesh Jaiswal

    Hi Kumar,

    Could you send me your Email ID and Contact No.? There are few investors who are willing to invest around 7 MW SRTPV Schemes of Karnataka.

    Please send on entornoenergy@gmail.com

    Thamks & Regards

    Ratnesh Jaiswal

  13. Victor

    We have serious Investor Mandate for Farmers PPA of Rs. 8:40 and existing Rooftop of Rs. 9:56 PPA. Any PPA holders interested on sharing basis please contact us we will close the deal within 1 Week.

    Contact me at ppa@madretrinity.com


  14. sk

    THis is a pocliy designed for high end farmers and people getting these 300mw in 1-2min is a utter joke of the whole selection process. Even today, many farmers are rather selling / demanding premium price backed up by certain unknown hand. its like a real estate sale …

    god save Karnataka

  15. Manu

    What are the terms of lease offered to farmers to use their land for power projects? Send me some sample deeds and case studies. Thanks.

    1. Dilip

      hello sandeep,

      what is your progress in getting ppa from karnataka government and please share the info you have regarding signing ppa as i am also interested in setting up 1mw scale solar power plant in the land at chickballapur region of karnataka

  16. venkatesh

    Dear friends ,
    I have a land at Holavanahalli in koratagere taluk,tumkur district and interested in solar power project of one MW.
    pls avice on how to get PPA and investor.

    I appreciate your reply

  17. raghunandan

    Hi All,

    My self raghunandan. i gone through your mail, this project is really going on. please feel free to call me
    I have land and i can provide to rental basics. if any one is interested please can me 9535150102 or you can share the details to my email ID raghunandanrao356@gmail.com

  18. Ajit Bondre

    Hello ,

    My self Ajit Bondre I have land of 15 Acer in near ratnagiri-Devrukh-Devghar I don’t have money to invest in solar plant but I am interested to create new plant on that land.. how much i will get back from PPA aggrement with MSEB for same project can you please let me know the Whole process

    Ajit Bondre

  19. Jayanth gowda

    If a farmer has some 3 acres of dry land and want to use it for solar power generation, what is the procedure and what would be the government support for that farmer…..Can u share the details

  20. Mahesh

    We have land around 100 accers and we are ready to give land on rent for solar power plant please I need any investor so if any one interestend call me 9448960948

  21. Siddharud Bhagat

    hello ,
    sir we had a land in which we want to install the solar penals so that this can help for the around formers and,also shorted of energy but we are not having the idea How to reach up to it and also want financial assistant so kindly be humble to assist me .
    thank you sir


    I am having an agriculture land in Pavagada, since September 2014. I could not get through on line under the farmers’ scheme
    for 1-3 MW. What could be done now and are there any suitable schemes in the Solar Policy for my consideration.
    Request for your guidance.

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