Sowing sunshine: Can agriphotovoltaics offer a path to doubling farmers’ income?

In recent years, the contribution of agriculture and allied sectors to economic output has declined, with farmers’ real incomes virtually stagnating. This article demonstrates that new ideas such as agriphotovoltaics, which combine solar power with crop cultivation, have the potential to boost farmers’ incomes while also enhancing land-use efficiency and combating climate change.

In 2016, Prime Minister Narendra Modi set a lofty goal, to help farmers double their real income by 2022. Since then, the government has implemented programmes such as PM KISAN and Pradhan Mantri Fasal Bima Yojana (PMFBY)¹, among others. Farmers have received increased access to institutional credit through the KISAN Credit Card (KCC).

However, all is not well with agriculture in India. As per the Economic Survey Report 2023-24, the share of agriculture and allied sectors in the Gross Value Added (GVA) of the economy has declined from 20.3% to 18.3% between 2020 and 2023. GVA of agriculture and allied sectors (at 2011-12 prices) has declined from 4.1% to 1.4% between 2020 and 2024. Real income of farmers has not substantially improved. Land constraints and low productivity hinder agricultural growth, and climate change exaggerates this crisis further (Gulati, Kapur and Bouton 2019).

Under these circumstances, new ideas like agriphotovoltaics (APV) are worth exploring. APV combines solar power with crop cultivation. This provides dual revenue streams for farmers – from crop production and power sales. Besides boosting farmers’ incomes, APV enhances land-use efficiency and helps combat climate change.

The APV model: Farmers, cooperatives, and developers

APV involves a multitude of stakeholders: Farmers to till the land under the solar panels, private companies (developers) to build and own the solar assets, and distribution companies (DISCOM) to buy the solar power. In order to successfully scale up, the project must be workable for each stakeholder. New research by Basu, Gulati and Adholeya (2025) shows that this can be the case.

A 2024 study by the Indian Council for Research on International Economic Relations (ICRIER) looked into an APV project by Sunmaster Systems in Najafgarh, Delhi. In this model, the farmer leased his land to the private developer for 25 years. Prior to the installation of the APV infrastructure on his land, the farmer reported earning a net income of around Rs 41,000 per acre annually by growing traditional crops like wheat and mustard. Post the installation of the plant, the farmer receives Rs 1,00,000 per acre annually as lease income, which is more than twice his baseline income. As per the farmer, the fixed income provides him financial stability, shielding him from crop failure risks and low land productivity. As per the contract, the returns from energy sales and crop income go to the private developer who had invested in setting up the solar infrastructure. The developer sells energy to DISCOMs at a feed-in-tariff of Rs 5.10/kilowatt-hour (kWh) and earns additional income through the cultivation of horticulture crops.

The study also considered an alternative approach where the farmer retains the right to cultivate and sell crops in addition to earning rent. By growing high-value, shade-tolerant crops like tomato, potato, or turmeric that usually perform better under shaded infrastructure, the farmer’s income from agriculture could reach Rs.1,50,000 per acre, pushing total annual earnings from crop cultivation and the lease to around Rs. 2,50,000 lakh per acre. This would mean a sixfold rise in income compared to conventional farming, thus underscoring the potential of APV to substantially enhance rural livelihoods.

Data from the 77^th round of the National Sample Survey reveal that more than 85% of farmers in India are small and marginal. These farmers have landholdings of less than 5 acres. Land constraints (requirement of about 8 acres per megawatt (MW)) of solar power may exclude them from APV. High capital costs (up to Rs. 4 crores per MW) may further this exclusion. Here is where farmer cooperatives can play a role: Farmer cooperatives or Farmer Producer Organisations (FPOs) can pool land and capital to overcome the barriers to entry for APV. In this case, the FPO would function both as a solar developer and as a farmer, accruing both incomes.

For developers, the return on investment depends on tariff rates. Small-scale solar projects, such as those under PM-KUSUM Component A², typically incur tariffs between Rs. 2.50 and Rs. 3.50/ kWh. At Rs. 3.25/kWh, APV projects studied remain viable. At this tariff rate, the developer can recover the cost in 10 years.³ The discounted payback period drops to 7 years at a tariff of around Rs. 3.50/kWh. A tariff of Rs. 3.25/kWh (where APV becomes viable) is lower than the Average Power Purchasing Cost (APPC) of thermal power (Rs. 3.85/kWh).⁴ Hence, on the demand side, DISCOMs may find APV more appealing than thermal power.

Promoting APV: Financing, land-use policies

APV holds immense potential in India, but its success depends on overcoming existing roadblocks. Solar projects are capital-intensive, costing several crores per MW. Grants, low-interest loans, and tax incentives can help farmers mitigate high upfront costs. Besides interest rates, strict loan requirements like mortgaging enormous assets make it harder to get financing. Targeted policies, such as expanding the National Bank for Agriculture and Rural Development’s (NABARD) credit guarantee fund, could improve financing options and make them more viable.

The government has allocated close to Rs. 7,000 crores to farmer collectives this year. This will create 10,000 more FPOs. The budget also outlines a grant of Rs. 15 lakhs per FPO and a credit guarantee facility of up to Rs. 2 crores. Expanding the FPO ecosystem in the country could accelerate APV take-off, and make APVs more inclusive.

State governments should also strengthen their land-use policies – permitting mixed land use without requiring the conversion of agricultural land to non-agricultural status would help streamline investments into APV. Further, states ought to accommodate land leasing agreements into their respective land-use policies. Such arrangements would give more flexibility to farmers and developers, and increase the pool of land available. Finally, there is a need for capacity-building programmes for farmers to build and manage APV systems effectively.

APV addresses two critical challenges simultaneously – fighting climate change while improving land-use efficiency. It offers a sustainable path to higher productivity by enabling clean energy generation alongside farming. With proper support, APV could be the missing piece in the long-standing puzzle to double farmers’ incomes.

The views expressed in this post are solely those of the authors and do not necessarily reflect those of the I4I Editorial Board.

Notes:

PM KISAN aims to provide annual minimum income support to farmers; while PMFBY aims to provide insurance cover against crop failures, thus helping to stabilise the farmers’ income.
The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan, or PM-KUSUM, focuses on establishing decentralised, grid-connected solar or renewable energy-based power plants by individual farmers, groups of farmers, cooperatives, or other organisations, with the aim to generate renewable energy and feed it into the grid.
Figures on feed-in-tariff are based on State Electricity Regulatory Commission (SERC) tariff orders from different states implementing PM-KUSUM A. Calculations have considered a debt-equity ratio of 70:30 for financing capital expenditure, as is the usual norm under PM-KUSUM A.
Based on a petition on the Calculation of Average Power Purchase Cost (APPC) rate at the national level.