Why We Need Smarter, Targeted Subsidies To Promote Solar Irrigation?

They are superior to diesel pumps as they only require sunlight for fuel, have limited maintenance costs, and are lighter and easier to maneuver in Nepal’s rough terrains.

Sept. 10, 2020, 1:10 p.m. Published in Magazine Issue: VOL. 14 No. 04, September 18, 2020 ( Ashwin 2, 2077) Publisher: Keshab Prasad Poudel Online Register Number: DOI 584/074-75

The pandemic is forcing thousands of migrant workers to return home to Nepal. While this sudden influx of citizens presents an economic challenge­– particularly since Nepal earns 28% of its GDP from migrant workers’ remittances – it may also provide an avenue for long-term prosperity. COVID-19 has reignited the debate on food security amid concerns about the volatility of import prices. By breathing new life into Nepal’s agricultural sector, the returnees could help our nation achieve greater self-reliance in food production. The newly unveiled 2020/21 budget for Nepal demonstrates the Government’s continued interest in promoting agriculture; NPR 27.96 billion has been set aside for irrigation alone.

Given this situation, the time is ripe to promote useful, efficient and inclusive technology that can help small-holder farmers to maximize production. And, with the Government’s growing interest in clean energy, promoting renewable energy technology like solar pumps for irrigation makes much sense. Since their emergence globally in the late 1970s, solar irrigation pumps (SIPs) have become progressively more affordable through decreasing production costs and increasing demand. They are superior to diesel pumps as they only require sunlight for fuel, have limited maintenance costs, and are lighter and easier to maneuver in Nepal’s rough terrains. Aside from supporting crop production, pumping groundwater with SIPs in the pre-monsoon period could help to reduce the risk of floods by lowering water tables in countries like Nepal where much of groundwater remains underexploited.

Currently, the Government subsidizes solar pumps to a maximum of 60%of the equipment’s cost, with variations in payment amounts linked to geographical remoteness. The mechanism through which it does this is the 2016Renewable Energy Subsidy Policy. Since then, when the Policy was launched, the Alternative Energy Promotion Center (AEPC) has helped farmers install nearly 1,400 SIPs, deployed mostly in the Terai region. The subsidy is usually delivered via private vendors, which help farmers complete their applications, install the equipment and monitor its use. An early assessment of the Policy’s effects concluded that, while it was a promising intervention, it could be more effective if payments were better targeted, there was a greater focus on gender and inclusion, and local governments were actively involved in applying and overseeing it.

The subsidy upper limit of 60% is not based on a market-oriented understanding of farmers’ needs. So, while the Policy has definitely helped to increase the uptake of solar pumps, only farmers who can afford to pay the remaining 40% of the cost of the technology have been able to benefit from the initiative. Poorer small-holder farmers, especially women and the marginalized are still far from its reach. Their lack of social and economic capital prevents them from accessing both information about the technology and financing mechanisms that would enable them to invest in it. Meanwhile, criteria such as the need for applicants to have land registered in their name exclude many women and tenant farmers, with no land entitlements, from participating in the scheme.

So, how might we best overcome these challenges? First, the subsidy provisions should be targeted to those who cannot otherwise afford the technology. This calls for a deeper understanding of the different ways in which men and women, occupying varying socio-economic conditions, use energy. Intense data and research related to gender and social inclusion is required to fill this pervasive gap in our policies and programs.

Second, financing models are needed to support ‘fee-for-water’ and ‘rent-to-own ‘irrigation-provision models. In the fee-for-water model, a local private-sector actor buys solar irrigation equipment and sells water to farmers, enabling small-scale farmers to access water without buying their own pump. Water prices would need to be lower than those currently charged. With the rent-to-own model, a farmer pays a portion of the cost upfront and signs a water-sale agreement scheduling regular future payments. Once all the payments have been made, the farmer owns the equipment. Both of these models have been successfully demonstrated by private players in Nepal.

Models where a higher subsidy is provided for smaller pumps, or where market innovation is encouraged to decrease the cost of technology on the supply side, could also be worth considering. Furthermore, a performance-based subsidy– where stipulations are set for a minimum number of SIPs to be installed and operated, to defined performance standards – could invite competitive proposals from private-service vendors. Concerning the 40% capital cost, microfinance providers are often the go-to lending institutions for farmers; these could offer lower credit interest to economically challenged farmers to help them afford the technology.

Third, there needs to be greater emphasis on gender and social inclusion. Nepal’s newer renewable energy policies and strategies have shown some sensitivity in this regard but it often relates to women’s traditional roles, such as security and health concerns around collecting and using fuel wood, and applying renewable energy technologies, such as SIPs, to reduce the burden of women’s work. This is no doubt important; with the growing ‘feminization’ of agricultural labor in the country, women’s share of work in the fields has increased dramatically. However, focusing only on provision of labor-saving energy technologies for women is not enough. A better approach is to empower women by increasing access to economic and decision-making opportunities related to energy. However, more research is needed to identify effective ways to do this.

Some projects, including initiatives led by ICIMOD, have shown that awarding higher subsidies on SIPs for women-owned land has created more incentive to transfer land in the name of women. Land ownership, with its ties to decision-making rights at the household and community levels, remains a valuable asset across most of South Asia. Larger-scale experiments are needed to assess the effects of awarding additional subsidies on SIPs to applicants who transfer land or assets to woman. Energy organizations could support women and marginalized groups, who are currently disproportionately represented within the sector, to access technical information about both SIPs and groundwater governance in general. Small but important developments such as being able to speak with female technicians could help rural women feel at ease when seeking information on agricultural technology, its use and maintenance.

The use of SIPs alone will not automatically create profitable farmers because successful smallholder irrigation is based on three inter-related components: water access, water distribution and productive resource use. The support in accessing groundwater that SIPs provide needs to be combined with suitable water-distribution systems, the ability to grow high-value crops, and use of fertilizers and other inputs, for farmers to make best use of the technology. Attention must also be paid to factors such as market-access and linkages, and the optimal use of water extracted and energy generated.

Current concerns about food security in Nepal are related more to the disruption of supply chains than the lack of available produce. Agriculture remains a national priority, and the present mass reverse-migration will reduce previous labor constraints. However, our farmers will soon need to compete once more with cheaper Indian food imports, which are why they must be supported with better technology, and access to seeds for profitable crops.

Local governments, which have been granted large responsibilities concerning local agriculture and irrigation schemes, could play a key role here. While AEPC remains central in renewable energy policy formulation, local governments could be supported by the Center to formulate and implement small-scale renewable energy plans for pro-poor and gender-inclusive projects. They could also create policies within the existing framework, as per their mandate, to better target beneficiaries.

Civil society actors could work with local governments to develop knowledge products regarding SIPs, disseminate information about obtaining subsidies far and wide, and train local government staff in the use and adoption of the technology. Simple developments by local governments, such as translating AEPC’s literature into the local language, and reaching out to marginalized farmers to encourage them to opt into the subsidy scheme, could mean that the Renewable Energy Subsidy Policy not only increases renewable technology uptake but does so by reaching the most vulnerable households.

Uprety and Dr. Pandey are Research Officer and Regional Researcher at the International Water Management Institute in Nepal, respectively.

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