Solar project developers have found a solution to the land acquisition issue dogging the sector. Instead of buying land for their projects, these developers are entering into 25 to 30 years lease rental agreement with landowners.
As part of the agreement landowners are receiving a lump-sum amount of at least Rs 1 lakh per acre per year from the project developers for the lease period.
In this co-development model landowners are made part of the project. At the end of the lease period, land owners are free to sell off the land to the developers and it is a trend that has been picking up in states like Uttarakhand, Himachal, Punjab Andhra Pradesh and Telengana.
Vinay Bridge to India MD Vinay Rustagi: "We see lease model becoming much more common in near future particularly because of the problems associated with outright land purchase.
Taking land on lease is an ideal solution for both land owner and project developer. The land owner earns a stable allowance income plus retains the right to future capital gains. So the fear caused by farmers of losing their livelihood is eased to a great deal. The project developer, on the other hand, minimizes the upfront capital commitment and gets faster access to land." Ray Power, a large solar power developer has, in fact, recently entered into lease agreement with landowner.
"Instead of forcing farmers to sell their land, we have devised a model where farmers can also become a part of the project, and as a result, will enable the solar company to use 500 acres of land in such a difficult terrain," said Varun Jairath, director - investment and finance at Rays PowerInfra
Sunil Jain, CEO, Hero Future Energies: "This option is best fit for states with expensive land proposition like Punjab and Karnataka, where the cost per acre is in the tune of Rs 15 crore and Rs 25 crore."
"Land leasing is a win-win situation for both farmers and developers, where farmers continue to own the land. It eases land procurement timeline for any developer. It also reduces land related issues because farmers become partners in the project with a regular income in place. We are trying to explore this mode for our projects in Karnataka," said Jain.
Raj Prabhu - Mercom Capital Group said: "Leasing land for solar projects happens all over the world. In a country like India, using arable agricultural land for solar power generation could become a sensitive issue," commented Raj Prabhu, CEO and Co-founder of Mercom Capital Group, a clean energy research and communications firm.
