New Delhi: State-owned financial institutions Rural Electrification Corp. (REC) and Power Finance Corp. (PFC) will offer loans specially designed for renewable energy projects as they seek to help the sector meet its massive financing requirements, minister for power, coal, mines and renewable energy Piyush Goyal said.
Goyal told reporters that the government was also planning to set up a dedicated fund for making equity investments in renewable projects, but was waiting for interest rates to soften a bit more.
“We are waiting for some interest rate correction. That will help right-size investors’ expectations on return on equity,” the minister said.
Mint had reported on 5 February that the government was in the process of setting up a $1.25 billion fund, backed by state-owned and private institutions, to finance renewable energy projects. REC and PFC have committed about $300 million for this fund.
According to official estimates, India requires about $140-160 billion of investments to take renewable energy generation capacity of 34 GW reported in February 2015 to 175 GW by 2022. The country had managed to raise it to 43 GW by last month.
The government, committed to reducing carbon emissions by 30-35% and to increase the share of renewables to 40% of the energy mix by 2030, is seeking to raise the availability of funding for the sector.
It got a commitment on 30 June from visiting World Bank Group president Jim Yong Kim for $1billion of loans to renewable energy projects.
Industry executives said that availability of finance depends on how well a project is conceived. “Feasible projects and credible promoters will not find any problem in accessing finance,” said Sanjay Aggarwal, managing director of solar power producer Fortum India Ltd.
Goyal also said that as a means of cutting down carbon emissions, he preferred modernising thermal power plants older than 25 years rather than managing them with repair and maintenance work.
Thermal plants accounting for about 37 gigawatt (GW) of the country’s over 300 GW power generation capacity have been identified for phasing out.
The minister also preferred inclusion of the electricity sector in the proposed goods and services tax (GST) regime; keeping it out will lead to power producers accumulating credits on GST paid on raw materials and services consumed which cannot be used to offset the tax liability on electricity sold.
“It is desirable to have fewer distortions in the tax regime,” the minister said.