Leasing Farmland for a Solar Plant: Rent, Rules and Risks (2026)

At a glance

Key points from the Ministry of New and Renewable Energy (MNRE) and central law. State rules sit on top of these and differ widely.

How PM-KUSUM Component A works

Component A of MNRE's PM-KUSUM scheme covers small, decentralised, grid-connected solar or other renewable plants, with a target of 10,000 MW in the MNRE FAQ of June 2022.

Under the guidelines, individual farmers, groups of farmers, co-operatives, panchayats, Farmer Producer Organisations (FPOs) and Water User Associations can set up plants of 500 kW to 2 MW. The local DISCOM buys the power under a 25-year power purchase agreement (PPA) at a pre-fixed levelised tariff. The DISCOM receives a procurement-based incentive of 40 paise per unit or Rs 6.6 lakh per MW per year, whichever is lower, for five years.

Farmers who cannot raise the equity may work through a developer or the DISCOM, giving their land on lease. This is the arrangement most landowners meet.

On timelines: the scheme was earlier extended to 31 March 2026. Trade press reported in April 2026 that MNRE allowed projects with a PPA or notice to proceed issued by 31 December 2025 to complete by 31 March 2027, and that a successor "PM-KUSUM 2.0" was under consideration. We could not confirm these April 2026 changes on an MNRE page; check the current status with your state nodal agency or DISCOM.

Larger private plants lease land on commercial terms outside PM-KUSUM; the lease points below apply to both.

How solar lease rent is set

MNRE's Component A guidelines say lease rent is mutually agreed between the parties. It can be fixed in one of two ways:

• a fixed amount per acre per year; or
• an amount per unit of electricity generated, per acre.

The guidelines also give the landowner an option to have the DISCOM pay the rent directly into the landowner's bank account, deducted from what the DISCOM owes the developer. That reduces the risk of a developer paying late. MNRE provides a model Land Lease Agreement, but its terms can be changed by mutual consent.

We have not quoted rent figures: MNRE publishes no benchmark, and figures in news reports are single reported deals, not rates. Compare offers on the same basis: per acre per year, with the escalation, security deposit and payment date stated.

Land use, conversion and tenancy rules

Whether a solar plant on agricultural land needs a change of land use (CLU) or non-agricultural conversion is a state matter. Revenue codes and tenancy laws differ: some states require formal conversion orders, some have separate rules or deemed conversion for renewable plants, and some restrict long leases of agricultural land altogether. Check your state before signing:

1. Does the state's land revenue law require conversion or permission for a solar plant on this land class?
2. Does the state's tenancy law limit leasing of agricultural land, or the term of such a lease? See our guide to leasing agricultural land.
3. If the panels are on stilts under Component A and farming continues, does the state still treat the land as agricultural?
4. Who pays the conversion fee and any change in land revenue, and what happens to the land's status when the lease ends?

Ask the tehsil or collector's office, and have a local advocate read the state rules against your khasra (खसरा). In a master plan area, the development authority's zoning also applies. For large aggregations, see land ceiling laws explained.

Lease term, registration and stamp duty

A Component A plant sells power under a 25-year PPA, so a developer will want a lease at least that long, often with time added for construction and an option to extend. The guidelines do not fix the lease term; it is set in the agreement.

Section 17(1)(d) of the Registration Act, 1908 makes registration compulsory for leases of immovable property (the Act's words) from year to year, for any term exceeding one year, or reserving a yearly rent. Section 107 of the Transfer of Property Act, 1882 says such leases can be made only by a registered instrument. Register it at the sub-registrar office; our land registration process guide covers the steps.

Stamp duty on leases is fixed by each state and usually depends on the lease term, the rent and any premium. We have not listed rates; check the state stamp schedule or our stamp duty and registration charges by state page.

Rent from land used for a power plant may not count as agricultural income; confirm tax treatment with a chartered accountant.

Escalation, exit and decommissioning

The clauses for later years matter as much as the starting rent. Settle these in writing:

• Rent escalation: a fixed percentage step at set intervals, stated in the deed, rather than "to be discussed".
• Payment security: a security deposit, the DISCOM direct-payment option where available, and interest on late rent.
• Termination: what happens if the PPA is cancelled, the developer defaults, or the plant is not built within a set time.
• Assignment and mortgage: whether the developer can transfer the lease or give it to lenders as security, and on what notice.
• Decommissioning: who removes panels, mounting structures, cables, inverters and foundations at the end; the deadline; who pays; and how the soil is restored. A restoration bond or retained deposit gives the landowner some security.

Section 108 of the Transfer of Property Act sets default lessor and lessee rights, including removal of things attached to the earth in some cases. State removal and restoration clearly in the deed rather than relying on defaults.

Buying land that is already leased

Under section 109 of the Transfer of Property Act, when a lessor transfers leased land, the buyer takes on the lessor's rights and, unless agreed otherwise, the lessor's liabilities under the lease. In practice, a buyer of solar-leased land:

• receives the rent for the remaining term, but cannot use the leased area or end the lease early except as the deed allows;
• is bound by the escalation, renewal and decommissioning terms the seller agreed;
• may find that the developer's lenders hold security over the lease;
• inherits any conversion conditions and revenue dues attached to the land.

Before buying, get the registered lease deed and all amendments, the PPA reference, recent rent receipts, any lender's no-objection or tripartite agreement, and an encumbrance certificate that shows the registered lease. Then read our guide to checking land title.

What to check before you sign

• An "agreement" offered on plain paper or notary stamp only, for a 25-year or longer term. Long leases need registration.
• No minimum rent, only a share of power sales.
• No decommissioning or restoration clause, or one that leaves removal "as mutually decided".
• A developer asking for a power of attorney over the land beyond what the plant needs.
• No clear answer on whether your state requires conversion, and who bears the cost.
• Land not mutated in the current owner's name, or shared with co-owners who have not signed.

This guide does not assess any individual lease; have a local advocate review the deed before you sign or buy.

Frequently Asked Questions

Sources

• MNRE: Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyaan (PM-KUSUM)
• MNRE: Frequently Asked Questions on PM-KUSUM, 17 June 2022 (via PIB)
• MNRE: Guidelines for implementation of PM-KUSUM Component A (hosted by MSEDCL)
• MNRE PM-KUSUM portal: Documentation and compliance under the PM-KUSUM scheme
• India Code: The Registration Act, 1908
• India Code: The Transfer of Property Act, 1882