Tamil Nadu Proposes Levelized Tariff of ₹2.09/kWh for KUSUM-C Solar Program

The tariff will be applicable for 25 years


The Tamil Nadu Electricity Regulatory Commission (TNERC) has issued a consultative paper for establishing tariffs to purchase power from solar energy generated under Component C of the Pradhan Mantri-Kisan Urja Suraksha Evan Utthan Mahaabhiyan (KUSUM) program.

In its consultative paper, the state regulator has proposed a tariff of ₹2.09 (~$0.029)/kWh, which will be the upper ceiling tariff under the KUSUM-C program for 20,000 pumps.

The Commission has invited comments and suggestions from all the stakeholders by October 02, 2020.


The Ministry of New and Renewable Energy (MNRE) launched the guidelines for the PM KUSUM program on July 22, 2019.

Under Component C, the individual farmer having grid-connected agriculture pumps will be supported to solarize the pumps. The solar capacity of up to two times the pump capacity in kW will be allowed to be installed under the program. This is so that the farmer can use solar power generated to meet the irrigation needs and earn additional income by selling surplus solar power to the distribution companies (DISCOMs).

Tamil Nadu Energy Development Agency (TEDA) had filed a petition seeking the approval for the implementation of Component C of the KUSUM program for 20,000 agricultural solar pump sets of 7.5 HP load by installing an 11 kW solar PV project with a benchmark tariff of ₹4.53 (~$0.06)/kWh inclusive of an incentive of ₹1 ($0.014) to the farmer for net energy injected to the grid.

The Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) had suggested a benchmark tariff of ₹3.08 (~$0.04)/kWh for the same.

The present tariff for the agricultural category is ₹3.22 ($0.044)/kWh in the state.

The KUSUM-C program will be funded as follows:

  • Capital subsidy by the government of India: 30% of capital cost
  • Capital subsidy by government of Tamil Nadu: 30% of capital cost
  • Contribution by participating farmers: the net capital cost after subsidies

Last year, the Tamil Nadu government designated TEDA as the implementing agency for implementing the Component C of the KUSUM program across the state.

The Commission noted that the tariff determined will be applicable for the approved capacity of 20,000 grid-connected solar pumps and will be applicable for a life period of 25 years from the date of commissioning of each solar system.

Capital Cost

For calculating the tariff, the Commission adopted a capital cost of ₹39,000 (~$531)/kW. With this capital cost rate, there is a provision of ₹1,000 (~$13.6)/kW for metering and on-site wiring.

Debt-Equity and Return on Equity

The Commission considered a debt to equity ratio of 70:30. TEDA and TANGEDCO had proposed a return on equity of 17.60%. The Commission, in its order, adopted the same return on equity of 17.60%.

Term of Loan and Interest

According to the order, the Commission adopted a loan tenure of 11 years, which includes a one-year principal repayment moratorium and an interest rate of 10.55%.

Capacity Utilisation Factor (CUF)

The Commission considered a CUF of 19% and, additionally, a grid availability factor of 90%.

Operation and Maintenance Cost

TNERC said that it would adopt 1.50% of gross capital cost as the O&M cost with an annual increase of 5.72%.


As per the order, the annual depreciation rate of 3.60% per year proposed by TANGEDCO was adopted, and it was applied to the net capital cost for tariff determination.

Interest on Working Capital

The Commission adopted the working capital requirements of one month for O&M costs and two months for receivables with a working capital interest rate of 11.55%.

The tariff computed by using the above-adopted parameters resulted in a solar energy tariff of ₹2.09 (~$0.029)/kWh (25 years fixed), and it will be the maximum tariff under the KUSUM-C program for 20,000 pumps.

Tamil Nadu

The Commission also proposed that an incentive of ₹0.50 (~$0.006)/kWh to ₹1 (~$0.01)/kWh may be paid for the net energy exported to the grid. The amount of minimum incentive should initially be set at ₹3,000 (~$40.87) per year for a 7.5 HP pump-11kW solar PV system.

The Commission said that only farms where active farming throughout the year and where solar PV systems can be installed with adequate safety and security will be selected for the program.

Recently, the Rajasthan Electricity Regulatory Commission (RERC) approved ₹3.14 (~$0.04)/kWh as the pre-fixed levelized tariff for the Component A of the KUSUM program for capacities of up to 725 MW. The Commission also advised the DISCOMs to pursue the matter with the MNRE to increase the allocation under the Component A so that procurement-based incentive is available to the DISCOMs.


Image credit: JREDA