NEW DELHI :
India on Tuesday assured global investors that a payment security mechanism has been put in place to protect green energy investments.
This was articulated by India’s secretary in the ministry of new and renewable energy, Anand Kumar on the sidelines of Madrid Climate Conference (CoP25) in Spain and comes in the backdrop of global investors’ concern over the Andhra Pradesh government’ decision to relook renewable energy contracts.
“Payment Security Mechanism to de-risk investments in renewable have been put in place," said Kumar, according to an Indian government statement.
The statement assumes importance as Andhra Pradesh government’s move has sent the wrong signal to international investors and has serious implications on India’s ability to attract overseas investments and perception about the sanctity of legal contracts. It has the potential to dent India’s image as a clean energy champion.
Mint reported on Wednesday about state-run Solar Energy Corporation of India (SECI) enforcing a tripartite pact to collect Rs276 crore in dues from the Andhra Pradesh government from the central devolution.
The tripartite agreement between the Reserve Bank of India (RBI), the Union government, and the state governments that provides comfort to power producers against payment defaults by state electricity boards has been invoked for the first time, against the backdrop of hard-found compromise reached last month to end the impasse.
The Union government has been trying to seek a solution to the pressing issue in the backdrop of India’s clean energy sector going through a crisis. The investors in Andhra Pradesh’s clean energy space, such as Goldman Sachs, Brookfield, SoftBank and CPPIB, are marquee names on the global investment landscape. A negative signal from such blue chip investors may jeopardize India’s aspirations.
“We need to make the projects bankable and viable, resolve the uncertainties the projects may have in terms of their bidders and bankers, keep processes transparent, and create ownership among all stakeholders," added Manu Srivastava, principal secretary in Madhya Pradesh’ New and Renewable Energy Department in the statement.
Delegates from 200 countries, including India, are attending the 25th Conference of Parties (COP) currently underway in Spain. The meet is crucial as it is expected to finalize the rules governing the 2015 Paris Agreement which formally kicks in next year.
In a related development, Kumar also stated that Indian Renewable Energy Development Agency (IREDA)—one of the largest lenders in the country’s green energy space---is launching its own Alternate Investment Fund.
This comes in the backdrop of India running the world’s largest renewable energy programme which would require $80 billion till 2022. This requirement will grow more than threefold to $300 billion during 2023-30.
“He also informed that IREDA is launching its own Alternate Investment Fund to recycle its capital by attracting insurance, pension funds etc., with the aim to deepen the bond market, and in turn, allow the projects to directly link with public funds," the statement added.
With record low solar and wind power tariffs, banks are wary of lending to developers as they suspect the viability of projects that have agreed to sell power at rock-bottom tariffs.
India has set an ambitious target of 175GW of renewable energy by 2022 and 500GW by 2030. It has an installed renewable energy capacity of 83GW with another 70 GW capacity under different stages of implementation. The government plans to bid out the balance capacities for solar and wind by June 2020.
India has urged developed countries CoP25 to fulfill their pre-2020 commitments before the global stocktaking to review impact of climate action takes place.