RK Singh Rallies for Removal of Priority Sector Lending Limit for Renewable Projects
Various issues like land and transmission availability, GST ambiguities were also discussed during the meeting
June 12, 2019
Union Power Minister R.K. Singh held a meeting recently in the national capital to review the issues affecting the renewable energy sector. The meeting was attended by various stakeholders including the MNRE secretary and other senior officials from the Department of Economic Affairs, Department of Expenditure, Department of Financial Services, Department of Revenue and various representatives of the public and private banks and financial institutions were also in attendance.
In the meeting, it was decided that the Ministry of New and Renewable Energy (MNRE) would follow up with the Reserve Bank of India for the removal of the priority sector lending limit for the renewable energy sector. A move expected to encourage the private sector banks to lend more to renewable energy projects and help developers with much-needed finance.
In the meeting, Singh also asked the banks and financial institutes to categorize renewable energy as a separate sector, different from the power sector so that funds can easily flow to renewable energy projects. He further said that the current tariff rates discovered for various renewable energy projects are viable as the maintenance/running cost of renewable energy projects is comparatively lesser in the long run.
He also added that with time, the cost of renewable technology has been declining, whereas the efficiency of renewable energy equipment is improving day by day. Therefore, the low tariffs should not be thought of as an aberration, the minister said, urging the banks to come forward to lend more to the renewable energy sector.
This meeting comes as a positive development for the renewable energy sector in India, that has been struggling for options of easy financing. Mercom recently reported that in 2018, investments into India’s solar sector witnessed a decline of 15% year-over-year due to a slowdown in installations.
On the issue of delays in land acquisition for renewable energy projects, the minister said that SECI would partner with state governments and as the land will be on a lease, there will not be any upfront payment. It will also tie up for transmission infrastructure while floating bids. Banks were also asked to associate with SECI for offering predetermined loans to successful bidders.
Sunil Rathi, Director, Waaree Energies, commented on this development saying, “We are glad to see the introspective move made by the Power Minister RK Singh at the review meeting and, if implemented, the move will prove to be a respite for the Indian solar sector. While the proposed ease of financing will boost solar adoption for the CIN segment, the introduction of subsidy in the manufacturing sector will finally help domestic manufacturers amplify their capacities, thus reducing the market’s dependence on international players. Moreover, while the flexibility of renewable energy segmentation may slow down solar project execution, it will certainly provide developers with the impetus to opt for Indian manufacturers. Such reduced dependency on imports will strengthen the Rupee denomination, thus contributing to India’s GDP and employment generation scenario. Additionally, ensuring stringent RPO compliance and implementing ‘first in first out’ payment mechanism from DISCOMs will ensure steady demand and ease in cash flow, thus creating a sturdy and viable ecosystem. While we look forward to the formal directives and policies that will add concrete value to the discussions, this seems to be a progressive move by the re-elected government.“
According to Mercom Q4 and Annual India Solar Market Update, solar parks have continued to face issues in providing clearly demarcated, ready land for project development, causing undue delays and pressure on developers who end up having a shorter timeline to complete the project and the fear having to pay penalties due to no fault of their own. Government agencies have continued to tender and auction without making certain that land and transmission infrastructure are ready, and it is up to the developers to do the necessary due diligence and understand the risk profile before participating in the auctions.
Conversing with Mercom, Amit Gupta, Director Corporate Affairs and Legal, Vikram Solar, said, “The move of the Hon’ble Minister for Power and New & Renewable Energy advocating the removal of priority sector lending limit for green energy projects to address the drying financial stream for renewable energy projects is not only a welcome step for the industry but is a serious effort to fuel the growth of green energy revolution. For the past six-nine months, liquidity crisis in NBFCs and stressed assets in the thermal sector have led to shrinking financing options for the renewable energy sector. With this initiative, the industry is quite hopeful that the RBI and other banking institutions will positively react and will make sure that renewable energy projects receive sufficient credit lines to ensure faster adoption of green energy in India. This will help India achieve its target of 175 GW installations by the year 2022 and reduce its carbon footprints. The industry also welcomes his efforts in requesting the Ministry of Finance to put up a proposal before GST Council to resolve the matter regarding GST and inverted duties on renewable projects. The intent of the minister to promote domestic manufacturing of renewable energy equipment’s is also visible, which is lagging far behind and is yet to take off. India has the potential to emerge as a world leader in solar energy manufacturing and deployment, and the time has come to take this to level 2.0.”
Discussions were also held about the GST issues on renewable energy equipment, and components and the Department of Revenue was requested to place an appropriate proposal before the GST Council. The issue of inverted duty structure also came up for discussion, and Singh said that every measure needs to be taken to promote manufacturing in the renewable energy sector in the country, including corrections of duty structure and approval of a program to provide a capital subsidy. Discussions were also held on starting a pilot project to promote solar cooking in households.
When contacted a government official said, “This meeting was one of few that will take place as the Minister for Power wants to streamline the sector.”
Saumy is a senior staff reporter with MercomIndia.com covering business and energy news since 2016. Prior to Mercom, Saumy was a copy editor at Thomson Reuters. Saumy earned his Bachelors Degree in Journalism & Mass Communication from the Manipal Institute of Communication at Manipal University. More articles from Saumy Prateek.