• With record low solar and wind power tariffs, banks are wary of lending to renewable energy developers

  • India is running the world’s most ambitious renewable energy programme, with a target of 175GW of renewable energy capacity by 2022

New Delhi: The Centre is considering offering state governments concessional loans from public sector lenders Power Finance Corp. (PFC), Rural Electrification Corp. Ltd (REC) and the Indian Renewable Energy Development Agency (IREDA) to help power distribution companies clear green energy dues.

These three companies are the largest lenders to the power sector, and the move is expected to resolve a growing crisis in the clean energy sector even as India chases ambitious targets in renewable energy.

With record low solar and wind power tariffs, banks are wary of lending to renewable energy developers as they suspect the viability of such projects.

The loans are expected to be made available at cost plus a nominal fee to help clear the backlog that has resulted in electricity distribution companies (discoms) owing 67,237 crores at the end of August for power bought from generation companies (gencos). In return, the respective borrowing state governments will have to either offer a sovereign guarantee or escrow one or more of its revenue streams to the lender.

A spokesperson for the ministry of new and renewable energy confirmed the development, saying, “This is one of the options being considered.”

The mounting outstanding dues to the generators had the potential to dent India’s image as a clean energy champion and comes when new solar tenders of around 15,000 megawatts are in the pipeline.

The payment security measure is being sought to keep in mind the issue of non-performing assets (NPAs) in the Indian financial system. According to finance minister Nirmala Sitharaman, NPAs of India’s public sector banks came down to 7.9 trillion at the end of March. In comparison, gross NPAs were 8.65 trillion at the end of December 2018 and 8.69 trillion at the end of September 2018.

“This recourse has been provided to the states provided they offer a sovereign guarantee or escrow one or more of their revenue streams. This will help guarantee repayment of loans and also help sustain the clean energy sector,” a senior government official said on condition of anonymity.

News Source: Livemint