The Prime Minister’s Office has intervened to help ease credit supply to renewable energy firms, as the government moves to ensure that India’s efforts to emerge as a clean energy champion are not undermined by a lack of access to funds.
The PMO has asked federal policy think tank NITI Aayog to assess the situation after debt financing for green energy projects dried up with large banks such as State Bank of India (SBI) declining to fund projects that have committed to sell power at less than ₹3 per unit, two government officials said on condition of anonymity.
Sanction of funds by sectoral lenders such as Power Finance Corp. (PFC) and REC Ltd has also slowed down after the former bought a controlling stake in state-run rival REC.
India had achieved a record low solar power tariff of ₹2.44 per unit in May 2017. Wind power tariffs also plummeted to ₹2.43 per kilowatt hour at an auction held in December 2017. Prices have firmed up a bit, but banks are still wary of lending to developers as they suspect the viability of projects that have agreed to sell power at rock-bottom tariffs.
NITI Aayog is also trying to resolve problems such as delays in payment by state-run distribution companies (discoms) that range from two months to 15 months and non-allocation of land to wind power projects, as well as transmission- and connectivity-related challenges.
“The initial meeting on the issue has been held by NITI Aayog, which has also been attended by officials from the ministries of finance, power, and new and renewable energy, among others. Most of the projects that were awarded by quoting low tariffs have not been able to cobble finances together," said one of the senior government officials cited earlier.
“It is a widespread problem and public sector banks are not able to provide support," the chief executive of one of India’s largest green energy firms said on condition of anonymity.
India is seeking additional clean energy investment of around $80 billion till 2022, growing more than threefold to $250 billion during 2023-30.
“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 the second government official cited earlier.
PFC claimed that there is no slowdown in sanctions to renewable energy projects. “PFC is actively pursuing funding opportunities in the renewable energy sector, both greenfield projects and refinancing cases. During this financial year, PFC has so far sanctioned renewable energy projects with a cumulative loan amount of ₹4,000 crores and made disbursements of ₹3,600 crores," a PFC spokesperson said in an emailed response.
Queries emailed to NITI Aayog vice-chairman Rajiv Kumar and spokespersons for NITI Aayog, SBI, REC, PMO, and the finance ministry on 23 September remained unanswered till the time of going to press.
A spokesperson for the ministry of new and renewable energy declined to comment.