India Approves 3 Billion Rupees in Solar Pump Subsidies

India approved 3 billion rupees ($49 million) in subsidies to help farmers install solar-powered water pumps to boost agricultural yields and reduce expensive diesel fuel use.

The Ministry of New and Renewable Energy will provide grants to install 17,500 irrigation pumping systems to 2016 funded by a carbon tax on coal, according to a notice posted today on its website.

“Solar photovoltaic pumping systems can easily meet the irrigation requirements for small and marginal farmers,” the notice said. “It will increase the cropping intensity.”

India has 26 million groundwater pumps on farms that suffer from blackouts and volatile fuel costs. Switching those to run on solar would save about $6 billion a year in power and diesel subsidies and has drawn companies including BlackRock Inc.- backed SunEdison Inc. (SUNE) and Jain Irrigation Systems Ltd. (JI), Asia’s top irrigation-equipment maker.

Farmers travel long distances to procure diesel for their pumps, the notice said. The project will allow them to boost output and reduce diesel consumption, it said.

The grants will cover as much as 30 percent of project costs. State governments including Rajasthan, Tamil Nadu, and Maharashtra that participate in the program will be required to match with a subsidy covering at least 15 percent of the cost. Farmers will cover the remainder. The program’s total cost is estimated at about 10 billion rupees.

India began taxing coal producers and importers 50 rupees a metric ton in 2010, raising 25 billion rupees in its first year.

To contact the reporter on this story: Natalie Obiko Pearson in New Delhi at npearson7@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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