The PHD Chamber of Commerce and Industry has urged institutions like Indian Renewable Development Agency (IREDA), Solar Energy Corporation of India (SECI), Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to source global funds for financing renewable projects at single digit interest rates as such cheaper funds could be tapped by joint efforts of the proposed institutions.
The PHD Chamber is of the view that the rate of interest for the renewable projects must be in line with the global financing pattern and should be maximum 2% above the international interest price plus hedging as there is a definite possibility of bringing the interest of financing to single digit by tapping the global funds available in the renewable sector by the identified institutions for financing renewable projects.
In a representation sent to the Finance Ministry, President PHD Chamber of Commerce and Industry Mr Sharad Jaipuria has also demanded that the loans to renewable energy projects, having huge upfront fixed capital cost with negligible working capital be financed for a period of at least 20 years to reduce the burden of tariff and no penal interest for delays in statutory clearances be imposed as it will adversely effect projects in the initial stages.
Pension & insurance funds (having high duration funds) should be advised by the functionaries in the finance ministry to offer such loans to renewable projects provided they can see certainty of their off take and timely payments by State discoms, suggested Mr Jaipuria .
In India since 40 per cent of the population has no access to electricity thus it has become essential to promote renewable energy for this lot through tapping global funds with reduced interest rates as this provisioning exists provided financial agencies as proposed above come together to explore possibilities of accessing such finances for wide spread execution of renewable projects, points out the chamber.
The leading domestic institutions are too stressed to financially close such projects as these have been funding other mega projects in thermal, hydro and other infrastructure projects, therefore no harm if global financing can be attained since great possibility exist for these, further stated Mr Jaipuria.
In addition, the Chamber is also of the view that as renewable are being aggressively sought to overcome India’s growing energy shortage, a contingency fund needs to be set up by group of financial institutions to meet the force majeure conditions such as floods, hurricane, and avalanches and only 50% of the normal interest be charged during the restoration period as burden of such calamities be shared by all stake holders including lenders.
According to it, there is also a need for long term, stable as well as consistent policies at central and state level which should be firmed up only after due consultation with all stake holders including regulatory commissions to timely execute non conventional projects.
In addition amendments are required in the electricity act 2003 in order to ensure stringent renewable purchase obligation (RPO) compliance by the state governments, Regulators and utilities. Strong regulatory support is essential for enhancing RPO compliance. Long Term renewable purchase obligation trajectory needs to be established to facilitate renewable energy development. RPO obligations should be strictly enforced and REC mechanism to be structured to enable the developer to obtain minimum floor price directly within three months of submission of REC certificates.