India: Maharashtra Climate Resilient Distributed Renewable Energy Access Program

approved

Maharashtra is the largest contributor to India's gross domestic product. As a major agricultural state, it relies extensively on subsidized grid-electricity for groundwater irrigation. Grid-connected electricity for agriculture is typically supplied on a rotational basis, often late at night, as daytime power is prioritized for higher-paying commercial and industrial users. Night-time power is supplied almost exclusively by base load thermal plants, increasing the dependence on fossil fuels. The inability to recover costs from agricultural consumers leads to significant financial losses for MSEDCL, limiting its ability to maintain and upgrade the electricity grid for all users. These challenges are further intensified by climate change, with increased rainfall variability and extreme temperatures, making rain-fed agriculture less reliable and increasing the demand for dependable irrigation solutions. To address these issues, the state plans to (i) promote the adoption of off-grid solar-powered water pumps among farmers; and (ii) upgrade the grid to accommodate future solarization of agricultural feeders. The objectives are targeted by two current government programs, the “Magel Tyala Saur Krushi Pump Yojana” (MTSKPY) and the “Mukhyamantri Saur Krushi Vahini Yojana” (MSKVY 2.0). These programs seek to reduce dependence on fossil fuels by increasing the share of renewables in the electricity supply mix, alleviate financial pressure on MSEDCL, reduce cross-subsidy burdens on commercial and industrial users, and support broader objectives of clean energy use. By expanding solar adoption and preparing the grid for solarization, the program will make Maharashtra's electricity mix cleaner and more sustainable. The proposed Results Based Program (RBP) is designed to address financial challenges and boost solar energy integration by financing slices of MTSKPY and MSKVY 2.0. It consists of three key components: (i) financing 500,000 off-grid solar water pumps over the next five years; (ii) strengthening the distribution system by upgrading equipment such as transformers, breakers, and feeders to optimize power distribution and accommodate the increasing influx of solar energy; and (iii) providing technical assistance and capacity building to enhance the capacity of the implementing agency and beneficiaries to deliver consistent benefits. Solar water pumps under the RBP are only permitted in ‘safe' zones where groundwater extraction remains below 70 percent, and new connections are halted if an area's status deteriorates. Technical safeguards include a cap on pump capacity at 7.5 HP and a maximum borewell depth of 60 meters. The Groundwater Surveys and Development Agency (GSDA) conduct continuous digital monitoring to ensure compliance and inform zone classification. These measures are complemented by state and national water conservation programs, such as Jalyukt Shivar Scheme, Atal Bhujal Yojana, PMKSY, and PM-KUSUM, which promote efficient irrigation, artificial recharge, and sustainable groundwater management. The RBP will focus on four main results areas: (i) expanding access to solar-powered irrigation and daytime power supply; (ii) strengthening the program management unit; (iii) creating community benefits; and (iv) promoting public expenditure effectiveness. The RBP will be implemented in five years in a phased manner, through subphase 1 and 2. The financing for the RBP is proposed to be committed in 2 loan tranches, through 2 separate loan agreements, each loan agreement supporting one of the phases of the RBP. The phased financing approach will allow the Bank to incorporate lessons learned from the implementation of sub-phase 1 before committing the second loan tranche. The commitment of the financing for sub-phase 2 is contingent upon (i) installation of the solar water pumps and completion of the substations under Sub-phase 1; (ii) continued demand from MSEDCL for program support; and (iii) the Bank's satisfaction with the RBP's implementation.