India steps on the gas to set up World Solar Bank, may take up 30% equity

NEW DELHI: India is looking to expedite the International Solar Alliance’ (ISA) playbook of setting up a World Solar Bank (WSB), that may require a total equity capital of $10 billion and a paid-up capital of $2 billion, said two people aware of the development.

The plan being explored at the top levels of the National Democratic Alliance (NDA) government may involve the Bank being headquartered here, and comes in the backdrop of Beijing taking the lead in creating Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB).

According to initial proposed plans reviewed by Mint, India may become the lead member by taking a 30% stake in WSB, requiring a $3 billion commitment. ISA’ strategic goal includes mobilizing $1 trillion and reducing the cost of finance and technology.

Power minister Raj Kumar Singh recently reviewed the initial proposal, that is being explored at a time of the coronavirus pandemic giving India the opportunity to be seen as taking a lead in evolving global strategies. This also comes in the backdrop of the US withdrawal from the Paris climate deal and China’s attempts to co-opt countries into its ambitious One Belt One Road initiative.

“An inter-ministerial meeting may be called for the same,” said a person cited above aware of the development cited above requesting anonymity.

Mint had first reported about the proposed bank on 25 June 2018. Mooted by Prime Minister Narendra Modi in , as many as 84 countries have signed the framework ISA agreement and 63 have ratified it. Co-founder France has termed ISA as a ‘political project’ and it has become India’s calling card on climate change. It is increasingly being viewed as a foreign policy tool, with India also pitching it as a counterweight to Vienna-based Organization of the Petroleum Exporting Countries (Opec).

A finance ministry spokesperson declined comment.

Queries emailed to the spokespersons of ISA and India’s ministry of new and renewable energy on Tuesday night remained unanswered.

“The bank will help set up solar projects in member countries and aims to disperse $500 billion over 10 years and act as a concrete financial instrument of ISA,” said a second person aware of the development cited above requesting anonymity.

Setting up the WSB may require a total equity capital of $10 billion, a committed capital of $8 billion, and a paid-up capital of $2 billion. This will help in mobilising debt to the tune of around seven times the equity value. The idea being explored by ISA may also involve co-financing solar projects with other multilateral development banks and initially support sovereign guarantee backed solar projects in member countries.

The idea of a solar alliance of countries that receive sunshine for around 300 days in a year was mooted by Prime Minister Narendra Modi during the India-Africa Summit in Delhi in October 2015.

In his address to the nation on 12 May during the ongoing pandemic Modi said, “International Solar Alliance is India’s gift against Global Warming.”

“We have seen the world before Corona and the global systems in detail. Even after the infliction of the Corona crisis, we are constantly watching the situation unfolding across the globe. When we look at these two periods from India’s perspective, it seems that the 21st century is the century for India,” Modi said.

This comes against the backdrop of countries looking to diversify supply chains and move production lines out of China. India's neighbour has also been looked at with suspicion and blamed for not doing enough to arrest the spread of infections and not sharing information about covid-19 with countries.

ISA’ strategy is to leverage the demand from the member countries to reduce costs by aggregating the demand from member nations and then call for tenders. It has aggregated demand for solar pumps, rooftops, mini-grids, parks and home systems that require around $5 billion of financing requirement.

The proposed bank may also help India’s plan for a global electricity grid, that may initially aim to link countries such as Myanmar, Thailand, Cambodia, Laos, and Vietnam with the Indian sub-continent, as part of an evolving energy security architecture.

The proposal for a World Solar Bank comes against the backdrop of ISA’s mission to undertake joint efforts required to reduce the cost of finance and the cost of technology, mobilise more than $1,000 billion of investments needed by 2030 for massive deployment of solar energy, and pave the way for future technologies.