- In RESCO, the developer owns the plant and sells power for years.
- In CAPEX, the buyer owns the asset and the EPC is paid once.
- RESCO swaps a fast margin for recurring tariff income over the PPA.
- RESCO carries the most DISCOM payment risk; CAPEX carries little.
- Pick by your finance, balance sheet and risk appetite, not by habit.
- All money figures here are illustrative — verify with the live tender.
In PM-KUSUM, RESCO vs CAPEX is the first big choice for an EPC. The RESCO model means you own and run the plant and sell power for 20 to 25 years. The CAPEX model means the buyer owns the asset and pays you to build it. One pays slowly and forever; the other pays fast and once. This guide compares both, so you can match the model to your business.
What do RESCO and CAPEX mean in PM-KUSUM?
RESCO and CAPEX are two ways to fund and own a solar plant. RESCO stands for Renewable Energy Service Company. CAPEX is short for capital expenditure. The words describe who pays for the asset and who owns it — not the technology, which is the same in both.
These models matter most in Component A (decentralised ground-mounted plants of about 0.5 to 2 MW) and Component C (solarising grid-connected farm pumps, individual or feeder-level). A funded developer often picks RESCO. A lean EPC often picks CAPEX. Read the PM-KUSUM hub for the full scheme picture.
The RESCO model in one line
In RESCO, the developer builds the plant with its own or borrowed money, owns it, runs it, and sells the power. The buyer — usually the DISCOM under Component A — pays a fixed tariff per unit for the contract term. The developer earns a small margin on every unit, year after year.
The CAPEX model in one line
In CAPEX, the buyer pays the capital cost and owns the asset. The EPC builds the plant and gets paid against milestones, then hands it over. After handover, the owner takes the asset risk. The EPC keeps an O&M contract for a fixed term, then steps back.
Who owns the asset in each model?
Ownership is the core difference between RESCO and CAPEX. In RESCO, the developer owns the plant for the full contract life. In CAPEX, the buyer owns it from the day of handover. This single fact drives every other difference in money and risk.
RESCO: the developer holds the asset
A RESCO developer keeps the plant on its own books. It depreciates the asset, claims any tax benefit, and books the tariff as revenue. When the PPA ends, the asset may transfer to the buyer or be removed — the tender sets the rule. Confirm the end-of-term clause with the live tender before you bid.
CAPEX: the buyer holds the asset
In CAPEX, the asset sits on the buyer's books. For a farmer or a state agency, that means they hold the warranty claims and the long-term upkeep. The EPC's job ends at handover plus the agreed O&M term. This keeps the EPC balance sheet light.
Who carries the financing burden?
The RESCO model puts the full financing burden on the developer. The developer funds the whole build, often with a mix of equity and a project loan, and waits years to recover it. The CAPEX model puts the funding on the buyer, so the EPC needs far less of its own money.
RESCO financing: equity plus a long loan
A RESCO developer usually raises a project loan against the future tariff stream. Lenders want a sound PPA and a paying DISCOM before they fund it. The developer also posts the EMD to bid and a PBG after the award. These figures vary by tender — verify the current EMD and PBG with the live tender.
CAPEX financing: the buyer funds it
In CAPEX, the buyer arranges the money, sometimes with a bank loan or a government subsidy share. The EPC bills on milestones — for example on supply, on installation, and on commissioning. Because the EPC is not the long-term owner, it does not need to carry a 20-year loan.
Recurring revenue or a one-time margin?
RESCO gives recurring revenue; CAPEX gives a one-time margin. A RESCO developer earns a small amount on every unit sold, for the whole PPA term. A CAPEX EPC books its margin once, at handover. The total money can be larger under RESCO, but it arrives slowly.
RESCO economics: thin per unit, fat over time
Under RESCO, the tariff per unit is set in the tender. The margin on each unit is thin, but it repeats for 20 to 25 years. Over the asset life, the total return can beat a single CAPEX margin. The tariff and term are tender-specific — verify both with the live tender and the latest MNRE order. Our Component A tariff economics guide breaks this down.
CAPEX economics: cash now, then nothing
Under CAPEX, the EPC adds a margin on top of its build cost and bills it across milestones. The cash arrives fast and the project closes. There is no recurring income, so the EPC must keep winning new work to keep earning. CAPEX rewards volume and speed.
How do the risk profiles compare?
RESCO concentrates risk on the developer; CAPEX shifts most risk to the buyer after handover. A RESCO developer carries build risk, generation risk, and payment risk for decades. A CAPEX EPC carries build risk and a fixed O&M risk, then hands the asset back.
RESCO risks to plan for
- Payment risk — a slow DISCOM delays your tariff income.
- Generation risk — low sunlight or downtime cuts your units sold.
- Tariff risk — a low winning bid can squeeze the margin for years.
- Asset risk — you own and insure the plant for the full term.
CAPEX risks to plan for
- Milestone risk — a late milestone delays your payment.
- O&M risk — you must meet the AMC obligation for the fixed term.
- Defect risk — warranty claims fall in the early years after handover.
How big is DISCOM payment exposure under RESCO?
DISCOM payment exposure is the biggest risk in the RESCO model. A RESCO developer sells power to the DISCOM and waits to be paid, often for 20 to 25 years. If the DISCOM pays late, the developer's cash flow suffers, even though the plant ran well.
In CAPEX, the EPC is paid by the buyer at handover, so it barely touches the DISCOM for money. This is why a cautious EPC may prefer CAPEX in states with a weak DISCOM. To protect a RESCO cash flow, study the DISCOM PPA and payment security guide before you bid.
What protects a RESCO cash flow
A sound PPA, a payment security mechanism, and a letter of credit can lower the pain of a slow DISCOM. Some tenders add a tri-partite agreement or a state guarantee. The exact safeguards change by state and tender — verify the current terms with the state nodal agency and the live tender.
RESCO vs CAPEX: the side-by-side matrix
This matrix compares the two PM-KUSUM models across the points that decide your choice. Every money figure is an illustrative estimate — confirm the real numbers with the live tender and the state nodal agency before you bid.
Illustrative comparison for guidance only. Source: MNRE PM-KUSUM guidelines and SECI model documents — verify all figures and terms with the live tender and the state nodal agency.
When should your EPC pick RESCO or CAPEX?
Pick RESCO when you have strong finance and want long-term yield. Pick CAPEX when you want fast cash and a light balance sheet. The right model follows your money and your risk appetite, not what a rival chose.
Choose RESCO if you can say yes to these
- You can fund or raise a project loan for the full build.
- You can wait years for the return and hold the asset.
- You trust the DISCOM, or have payment security in the PPA.
- You want a recurring income stream, not just a one-off margin.
Choose CAPEX if these fit you better
- You want cash within months, not decades.
- You want to keep your balance sheet light and free.
- You do not want long DISCOM payment exposure.
- You prefer to win and deliver high volumes of projects.
Many EPCs run a mix. They take CAPEX work for cash and a few RESCO projects for yield. The Component A developer guide shows how to build and run a plant under either model.
What is the working-capital impact of each model?
The RESCO model is heavy on working capital; the CAPEX model is light. A RESCO developer locks up cash in the build and in the wait for tariff income. A CAPEX EPC recovers its cash on milestones, so less of its money is tied up at any time.
RESCO: cash locked for years
Under RESCO, you pay for panels, structures, and labour up front, then earn the money back slowly through the tariff. You also fund the EMD and PBG. If a DISCOM pays late, your working capital tightens further. Plan a cash buffer for slow months. The exact EMD and PBG percentages vary — verify them with the live tender.
CAPEX: cash cycles faster
Under CAPEX, milestone billing returns your cash through the project. You still need working capital to buy material before the buyer pays, but the cycle is short. Tight tracking of procurement and invoices keeps this cycle healthy and your margin safe.
How SuryaHub helps you run RESCO and CAPEX projects
The model you pick changes how you track money, but not the need to track it well. SuryaHub runs every PM-KUSUM project — RESCO or CAPEX — through one system, from tender and DISCOM steps to milestone billing and GST, and on to the 5-year AMC. For RESCO, it keeps DISCOM dues and tariff receipts visible so a slow payment never hides. For CAPEX, it tracks milestones so cash comes in on time. SuryaHub is pre-revenue; real pilots are Suryantra Energy and RGESPL, and the figures here are scheme estimates, not guarantees.
Track every model in one place
See how SuryaHub runs RESCO and CAPEX projects from tender to AMC.
Related guides
Frequently asked questions
What is the difference between RESCO and CAPEX in PM-KUSUM?+
In the RESCO model, the developer owns the PM-KUSUM plant, funds it, and sells power for years. In the CAPEX model, the buyer or farmer owns the asset and the EPC is paid once on handover. RESCO trades a one-time margin for recurring income.
Who owns the solar asset under a PM-KUSUM RESCO model?+
Under a PM-KUSUM RESCO model, the developer owns and operates the solar asset for the full contract term. The developer carries the build cost, the O&M duty, and the payment risk. The farmer or buyer never owns the plant in a pure RESCO arrangement.
Which model has higher DISCOM payment risk in PM-KUSUM?+
The RESCO model carries higher DISCOM payment risk in PM-KUSUM. A RESCO developer is paid by the DISCOM over 20 to 25 years, so any DISCOM delay hits cash flow. A CAPEX EPC is paid by the buyer at handover and avoids long DISCOM exposure.
When should a solar EPC choose the CAPEX model in PM-KUSUM?+
A solar EPC should choose the CAPEX model in PM-KUSUM when it wants fast cash, a light balance sheet, and no long-term DISCOM exposure. CAPEX suits EPCs that lack project finance or do not want to own and operate plants for many years.
Does the RESCO model need more working capital than CAPEX?+
Yes. The RESCO model needs far more working capital than CAPEX in PM-KUSUM. A RESCO developer funds the full build and waits years for tariff income. A CAPEX EPC is paid on milestones, so CAPEX ties up much less of the EPC capital.
Can an EPC do both RESCO and CAPEX PM-KUSUM projects?+
Yes. Many EPCs run both RESCO and CAPEX PM-KUSUM projects to balance cash and yield. The right mix depends on the tender terms, the available finance, and the appetite for long DISCOM exposure. SuryaHub helps an EPC track both models in one place.
How does SuryaHub help with PM-KUSUM RESCO and CAPEX projects?+
SuryaHub tracks every PM-KUSUM tender, milestone, payment and O&M task in one place, for both RESCO and CAPEX projects. SuryaHub keeps DISCOM dues and AMC schedules visible so nothing slips. SuryaHub is pre-revenue; real pilots are Suryantra Energy and RGESPL.
Sources & references
Model definitions, component rules and benchmark framing come from primary government sources. Every tariff, cost, EMD, PBG and timeline is an estimate — always confirm the current figures with the state nodal agency, the live tender, and the latest MNRE order before you bid.
- Ministry of New & Renewable Energy (MNRE) ↗
PM-KUSUM guidelines, component definitions and benchmark costs.
- PM-KUSUM National Portal ↗
Scheme dashboard, state progress and tender notices.
- SECI ↗
Model tender documents, PPA formats and bidding rules.
Written by the SuryaHub team · reviewed against MNRE, PM-KUSUM portal & SNA sources · updated 19 June 2026.
Method: Model definitions and risk points are taken from the government sources above and re-checked every 30 days. All money figures, tariffs, EMD/PBG and timelines are estimates to verify with the live tender and the SNA. SuryaHub is pre-revenue; only Suryantra Energy and RGESPL are real pilots.
Change log: 19 Jun 2026 — first published.