Financial Express, February 03, 2022
A parliamentary panel has asked the government to explore new and innovative tools to deal with the issue of financial constrains in the renewable energy sector, including setting up of green banks and introduction of renewable finance obligation for financial institutions, among others. “Since Green Banks have emerged as an innovative tool for accelerating clean energy financing globally, the Government should explore setting up of a green bank system which can address the persisting finance related challenges being faced by the renewable energy sector in the country,” the Parliamentary Standing Committee on Energy said in its 21st report tabled in Parliament on Thursday.
Keeping in view that the overall debt requirement is large and reducing the cost of financing to the renewable energy developers is important, it also suggested that the Ministry of New and Renewable Energy (MNRE) may explore the possibility of prescribing Renewable Finance Obligation on the lines of Renewable Purchase Obligation (RPO) for banks and financial institutions. The Renewable Finance Obligation will make them invest a specific percentage of their investment in the renewable energy sector. It also suggested that the ministry should work proactively to make available and explore innovative financing mechanisms and alternative funding avenues like Infrastructure Development Fund (IDF), Infrastructure Investment Trusts (InVITs), Alternate Investment Funds, Green/Masala Bonds, crowdfunding etc for the renewable energy sector. It noted that under India’s long term commitments, an additional investment of about Rs 17 lakh crore has been envisaged, which would include associated transmission costs. The country would need an annual investment of Rs 1.5 – 2 lakh crore in renewable energy sector, against which the estimated investment for the last few years have been in the range of Rs 75,000 crore only.
The committee also recommend that the ministry should actively engage with the state governments to avoid any unilateral cancellation/renegotiation of PPAs (power purchase agreements) as it causes uncertainty and negatively affects the investment in the renewable energy sector. It also suggested that a maximum period should be prescribed for according approvals/disposing of petitions by the State Electricity Regulatory Commissions through appropriate amendments in the Electricity Act. It recommended that the ministry should ensure proper implementation of the Electricity (Late Payment Surcharge) Rules, 2021 so that the developers get compensated for delays caused by discoms in payment of dues.
The ministry should also ensure that every PPA signed by renewable energy developers with discoms has a provision of payment security instrument and the same is implemented in letter and spirit. It stated that the ministry should pursue the states/discoms to clear dues on ‘first in – first out’ basis so that the oldest dues are paid first. The panel also stated that MNRE should pursue the matter of banks’ reluctance to lend with the local banks and ensure availability of funds for installation of renewable power capacity under schemes like rooftop solar and KUSUM. The limit of loans for the renewable energy sector under priority sector lending should be increased and the MNRE should pursue this matter with the Ministry of Finance and the Reserve Bank of India, it suggested.
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