Banks Don’t want to be Blamed for not Lending to Solar Projects Due to Risks Taken by Others

The MNRE and industry stakeholders discussed various issues plaguing the sector like safeguard duty, inefficiency of DISCOMs

September 20, 2018


It is common knowledge that the solar industry in India has several important issues that need to be resolved for the industry to keep growing. The Ministry of New and Renewable Energy (MNRE) organized a meeting in the national capital with all the relevant stakeholders of the solar photovoltaic (PV) sector to discuss the problems faced by solar PV sector in India.

Financial institutions (banks), solar PV project developers, module manufacturers, implementing agencies, were present for the discussion and they shared their views with the government on the current challenges. After the meeting, Mercom got in touch with a few who were a part of the deliberation and these were some of the important takeaways from the deliberation between the government and the industry:

  • The stakeholders felt that the MNRE is showing positivity and a proactive approach towards tackling new challenges that may surface in the industry.
  • After the meeting, it was agreed upon by both parties that renewable energy must be the priority of the government. It must be prioritized above conventional sources of energy.
  • Several bankers were happy with the growth of solar and it was discussed to give working capital loans for project development. It was agreed that such loans will be easy to service.
  • Few bankers were skeptical, but the overall view of financing institutions seemed positive.
  • Financial institutions do not want to be blamed for not lending to the sector as all of the current bets taken by the developers and policy changes made by the government ends up as risks on the lap of the lenders.
  • Imposition of safeguard and its effect on tariff was also discussed during the meet. Apart from that, land availability and transmission issues were also discussed.
  • The two parties also discussed the problem of delay in payment on the part of DISCOMs and how they should be supported.
  • Developers have requested the MNRE to impose fines/penalty in case the procurer does not buy power.

Shekhar Dutt, Director General, Solar Power Developers Association (SPDA) told Mercom, “The industry welcomes the initiative undertaken by the Honorable minister to deliberate on the concerns of industry and bankers in RE financing. As renewable energy is one of the fastest growing sectors in India, an assurance from MNRE on every tariff being discovered in the bids as a viable investment to fund, is a progressive move. With effective implementation of payment security mechanism (PSM) by DISCOMs, solar power developers are optimistic about fast track resolutions in RE financing.

Only a few days ago, raising concern over the recent proposal by the government to impose caps on solar tariffs, the SPDA had written to the government cautioning against the move. As reported recently by Mercom, the MNRE had issued a letter (reviewed by Mercom) directing Solar Energy Corporation of India (SECI) to set the maximum permissible solar tariff at ₹2.50 (~$0.036)/kWh without safeguard duty and ₹2.68 (~$0.038)/kWh if  safeguard duty is levied.

Overall, the meeting concluded on a positive note and all the stakeholders were able to put forth their views on various issues facing the industry currently. “It will go a long way in mitigating the challenges and uncertainties that arise due to them,’ a stakeholder present at the meeting told Mercom.