- A PM-KUSUM PPA is the Component A contract to sell power to the DISCOM at a fixed tariff.
- The PPA usually runs 25 years and the buyer is your local DISCOM.
- The tariff is mostly set by competitive bidding under a state ceiling — verify the rate.
- Payment security is usually a letter of credit, escrow or payment security fund.
- The big risk is slow DISCOM payment; read the security and surcharge clauses first.
- All tariffs, terms and security amounts are estimates — verify with the SNA and live tender.
A PM-KUSUM Component A project lives or dies on its power purchase agreement. The PPA decides what you are paid per unit, how soon the money arrives, and what happens when the DISCOM cannot take your power. Read it like a banker, not a salesperson.
What a PM-KUSUM PPA is
A PM-KUSUM PPA is the long-term contract under which a Component A developer sells solar power to the DISCOM at a fixed tariff. It is the heart of the deal. Under PM-KUSUM, Component A means you build a small ground-mounted plant, usually 0.5 to 2 MW, on farm or barren land, and feed the power into the local grid.
The PPA sets the price, the term, the payment rules and the penalties. Most PM-KUSUM PPAs run for 25 years, which is roughly the design life of the plant. That long horizon is why every clause matters. A small payment gap each month adds up over decades. Read the full picture in our Component A developer guide.
Who signs the PPA
The PPA is signed between the developer and the DISCOM, the state distribution company that buys the power. The state nodal agency (SNA) runs the tender and empanels developers, but the DISCOM is the actual buyer named in the contract.
Why the buyer matters more than the seller
Your tariff is fixed, so your revenue depends on one thing: does the DISCOM pay on time? Some DISCOMs are financially strong and pay fast. Others run large dues. Before you bid, check the buyer's payment record. A higher tariff with a weak buyer can be worse than a lower tariff with a strong one.
How the tariff is set
The tariff in a PM-KUSUM PPA is usually discovered through competitive bidding under a ceiling set by the state electricity regulator. Developers quote a per-unit rate, and the lowest evaluated bidder (L1) wins at its own quoted price. Some states use a fixed feed-in tariff instead of bidding.
The ceiling tariff and the bid
The State Electricity Regulatory Commission (SERC) sets a ceiling tariff. You cannot bid above it. Your job is to find a rate that beats rivals but still covers your cost of land, modules, construction, debt and a 25-year O&M. The tariff, the ceiling and the discovered rate change every state and round, so always verify the current figure with the SNA and the live tender. See our tariff economics guide for the full build-up.
Payment security mechanisms
Payment security is the set of tools that protect you if the DISCOM pays late. A PM-KUSUM PPA usually backs payment with one or more of these: a letter of credit (LC), an escrow account, or a payment security fund. Read which one your PPA gives you, and for how much.
The three common tools
A letter of credit is a bank promise the DISCOM keeps open so you can draw your monthly dues if it does not pay. An escrow routes part of the DISCOM's revenue to a controlled account you can claim from. A payment security fund is a pooled reserve the scheme maintains to cover gaps.
Late-payment surcharge
If the DISCOM misses the payment date, the PPA usually adds a late-payment surcharge, a form of interest on the overdue amount. This does not get you paid faster, but it compensates you for the delay. Check the surcharge rate and how it is calculated. The exact security and surcharge depend on the state and tender, so verify each with the SNA before you sign.
The clauses to read first
Eight clauses decide most of your risk and reward. Read these before anything else in the PPA. The table below gives you a fast triage list.
Indicative clause list for an EPC review. Always read the actual model PPA in your tender; clause names and terms vary by state.
Where EPCs get hurt
Most PPA pain comes from three places: slow payment, curtailment, and missed commissioning dates. Each one can quietly drain a project that looked fine on the bid sheet.
- Slow payment — a weak DISCOM can stretch dues for months, so your loan still has to be served while cash is stuck.
- Curtailment without pay — if the grid cannot absorb your power and you are not compensated, you lose revenue you planned for.
- Liquidated damages — a missed commissioning date triggers penalties, so a delayed connection eats your early returns.
- Change in law — a new tax or duty over 25 years can shrink your margin if the PPA does not pass it through.
A simple PPA review checklist
Before you sign, walk this list with your finance and legal team. Treat any "verify" item as a number to confirm with the SNA or in the live tender.
- Is the tariff and term written exactly as bid? (verify the rate)
- How many days to pay after a verified bill?
- What payment security backs the dues, and for how much?
- What is the late-payment surcharge rate?
- Are you paid for curtailment (deemed generation)?
- What are the commissioning penalties and the grace period?
- How does change in law protect your tariff?
- What ends the PPA, and what is the termination payment?
Curtailment and deemed generation
Curtailment is when the DISCOM tells you to reduce or stop exporting power, usually because the grid is full or unstable. The key question is whether you are still paid. A fair PM-KUSUM PPA treats forced curtailment as deemed generation and pays you as if the power flowed.
If the PPA lets the DISCOM curtail freely without paying, your revenue is exposed to grid conditions you do not control. Read this clause closely. For Component C2 feeder projects where surplus is exported, the net-metering rules can also affect what you are paid for extra units. Confirm the treatment with your SNA.
How SuryaHub helps you hold the DISCOM to the PPA
A 25-year PPA only protects you if you act on it. SuryaHub stores every PPA, milestone date and payment due date in one place, and runs each project through government workflows and finance and GST so each invoice is tracked against the DISCOM's payment timeline. When a bill goes overdue, you see it and can claim the surcharge. SuryaHub is pre-revenue; the only real pilots are Suryantra Energy and RGESPL, and the figures here are scheme facts, not guarantees.
Track every DISCOM bill against the PPA
See how SuryaHub flags overdue dues and surcharges across projects.
Related guides
Frequently asked questions
What is a PM-KUSUM PPA?+
A PM-KUSUM PPA is the power purchase agreement a Component A developer signs with the DISCOM to sell solar power at a fixed tariff. The PM-KUSUM PPA usually runs for 25 years and sets the tariff, the payment timeline, the security mechanism and the commissioning date. Verify the model wording with the state nodal agency and the live tender.
Who pays the developer under a PM-KUSUM Component A PPA?+
Under a PM-KUSUM Component A PPA, the local DISCOM pays the developer for every unit of power exported at the agreed fixed tariff. The PM-KUSUM PPA names the DISCOM as the buyer and sets how many days it has to pay after a verified bill. Confirm the exact payment terms in your tender PPA.
How is the tariff set in a PM-KUSUM PPA?+
The tariff in a PM-KUSUM PPA is usually discovered through competitive bidding, with a ceiling tariff set by the state regulator. The lowest evaluated bidder, called L1, wins at its quoted rate. PM-KUSUM tariffs vary by state and round, so verify the current ceiling and discovered tariff with the state nodal agency.
What payment security does a PM-KUSUM PPA give?+
A PM-KUSUM PPA usually backs payment with a letter of credit, an escrow or a payment security fund, plus a late-payment surcharge on overdue bills. These protect the developer if the DISCOM pays slowly. The exact security depends on the state and tender, so confirm the mechanism with the state nodal agency before you sign.
What is the biggest risk in a PM-KUSUM PPA for an EPC?+
The biggest risk in a PM-KUSUM PPA is slow or partial payment from a financially weak DISCOM, which can starve a Component A project of cash. Curtailment without compensation and tight commissioning penalties also hurt. Read the payment security, curtailment and liquidated-damages clauses closely, and verify each against the live tender PPA.
How does SuryaHub help with PM-KUSUM PPAs?+
SuryaHub stores every PPA, milestone date and payment due date in one place, and tracks each invoice against the DISCOM payment timeline so overdue bills and surcharges are not missed. SuryaHub is pre-revenue; the only real pilots are Suryantra Energy and RGESPL, and the figures here are scheme facts, not guarantees.
Sources & references
PPA structures, tariffs and payment-security rules come from primary government sources and change by state and round. Always confirm the current model PPA and tariff with your state nodal agency and the live tender before you sign.
- Ministry of New & Renewable Energy (MNRE) ↗
PM-KUSUM scheme guidelines and the model PPA framework for Component A.
- PM-KUSUM National Portal ↗
State allocations, tariffs discovered and scheme progress.
- SECI ↗
Model power purchase agreement and tender documents used by many states.
Written by the SuryaHub team · reviewed against MNRE, PM-KUSUM portal & SNA sources · updated 19 June 2026.
Method: PPA structures, tariffs and payment-security rules are taken from the government sources above and re-checked every 30 days. All tariffs, terms and amounts are estimates to verify with the state nodal agency, the live tender or the latest MNRE order. SuryaHub is pre-revenue; only Suryantra Energy and RGESPL are real pilots.
Change log: 19 Jun 2026 — first published.