Why PMO is So Concerned About RE Credit in India

Renewable energy projects are very capital-intensive and require a large number of funds.  However, ultra-low price points and rising levels of NPAs have made banks reluctant to lend to the Indian clean energy power sector. The Prime Minister of India has also stepped in to help the clean energy sector in India realize its full potential by resolving the issues of accessing easy credit for these projects. the ratification of the Paris Climate Change agreement and the inauguration of Gandhi Solar Park at the UN headquarters has marked India’s efforts towards establishing itself as a leading global clean energy player on an international platform. However, the country is suffering from a lack of funding to establish this stature. As such, the PMO has intervened to make available easy credit to RE players, so as to help the country become a clean energy champion.

India had already achieved a record low solar and wind power tariff of Rs. 2.44 and Rs. 2.34 per unit, respectively. The low price has raised doubt in the minds of many as to whether these projects would be feasible, let alone profitable. The PMO has asked Indian policy think tank NITI Aayog to assess the situation at hand after leading public banks like SBI declined to fund projects that have committed to selling power at rock-bottom tariffs. Funding from Power Finance Corp. and REC Ltd also slowed down. Niti Aayog is looking at resolving issues like delays in payment by DISCOMs, non-allocation of land for clean power projects, as well as other transmission infrastructure-related problems.

Given its ambitious clean energy target, the country is currently looking at $80 billion of funds till 2022, which is expected to increase three times to $250 billion during 2023-30. We hope the Indian government is successful in devising some plans for future renewable energy development in the country.

“There is a real problem but no easy solutions. Banks are not ready to lend to projects at low tariffs. They also have a point given the problem of NPAs (non-performing assets) they are facing,” said a government official.

Source: Live Mint