Government Strategies to Rescue Clean Energy Companies, To Provide Loans at Concessional Rates

The mounting unpaid dues to the generators had the latent 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

December 04, 2019. By News Bureau

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

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

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

The loans are anticipated to be made available at cost plus 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 corresponding borrowing state governments will have to either offer an independent guarantee or escrow one or more of its revenue streams to the lender.

In poor financial health, discoms have delayed payments to gencos even as the Centre steps up efforts to supply round-the-clock power to all. The inability of discoms to make payments has also added to the pain in the Indian banking sector as clean energy developers are facing difficulties to service their debt. The backlog of dues owed by discoms to gencos ranges from two to 15 months.

A spokesperson for the ministry of new and renewable energy established the development, saying, “This is one of the options being deliberated."

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

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