IREDA is a Public Limited Government Company established as a Non-Banking Financial Institution in 1987 under the administrative control of MNRE to promote, develop and extend financial assistance for renewable energy and energy efficiency /conservation projects with the motto: “ENERGY FOR EVER”.
IREDA has been awarded “Mini Ratna” (Category -I) status in 2015 by Ministry of New and Renewable Energy (MNRE).
In a wide-ranging interview to Sunrator, Chairman & Managing Director of IREDA “Mr. K.S. Popli” expressed his view over the Indian Solar power sector, financial needs of solar power sector and the role of IREDA to fulfill those financial needs. Here is the full text of the interview:
Interview Q & A’s – CMD, IREDA
What targets does IREDA have to fund the 100 GW dream?
The government’s roadmap for 100 GW of solar power by 2022 involves the installation of 40 GW through rooftop solar and the balance 60 GW through large scale solar projects under various other schemes. IREDA is fully geared and flexible with respect to quantum of its exposure in financing commercially viable solar power projects out of 100 GW. IREDA would act according to the market requirements.
With the recent reduction of repo rate by RBI, would it ease the lending rates in the solar industry too?
The impact of repo cut and other developmental and regulatory measures will be incrementally positive for banking and economy. A cut in rates will improve the return on equity for companies. The rate cut will facilitate the banks to analyze their cost of funds and their overall liquidity condition to enable them to offer lower interest rates to their customers across all sectors including solar. Incidentally, RBI has given “Priority Sector Lending” status for Renewable Energy Sector. Banks can extend loans upto a limit of ₹15 crore to corporate borrowers and up to ₹10 lakh to individual borrowers for RE projects under priority sector.
How actively is IREDA perusing the special financing needs of rooftop/small-scale solar projects?
Since its inception in 1987, IREDA has played a seminal role in the commercialization of renewable energy technologies in the country by providing innovative and customized financing requirements. IREDA comes out with new and innovative financing schemes from time to time in line with the market demand and requirements.
To meet the market requirement for financing renewables including rooftop / small scale solar projects, IREDA has introduced various new and innovative schemes viz. Bridge Loan Scheme against Viability Gap Funding for Solar Power Projects, Short Term Loan Scheme against MNRE Subsidy, etc and recently to tap the emerging solar rooftop market, IREDA has also launched a new Rooftop Solar Financing Scheme with interest rate ranging from 9.90% to 10.75% for funding industrial / institutional / commercial establishment either directly or through aggregators.
Towards sourcing low-cost and long tenor international funds, IREDA is in dialogue with several multilateral and bilateral agencies, enabling availability of credit at competitive terms. IREDA shall continue to support and finance all viable RE projects.
Would increase in FDI in Solar change the domestic lending environment?
For renewables, the Government has allowed 100% FDI. According to KPMG report, the third most favoured country to invest in renewable energy sector in the world is India, which is after China and the United States. More and more foreign investors are expected to make investments in Renewable Energy Sector, as there is a huge potential & opportunity exists in India. Solar sector will certainly observe massive overseas investments and achievements in the coming years. More and more FDI in Solar may create a positive and competitive lending environment among the Banking/lending community.
I may mention that FDI is an important channel for technology diffusion. Several multinational enterprises transfer firm-specific technology to their foreign affiliates or partners in joint-ventures. FDI can induce more knowledge transfer than trade in goods, since investment often comprises apart from the technology, also support services, such as management experience and entrepreneurial abilities.
As a leading lender what is your take on the development in next five years in the solar industry?
As India moves towards implementation of 100 GW plan, the government’s focus is changing from promoting incentive-driven projects to the creation of demand by market forces. Inspite of some initial issues and challenges, the rooftop solar market is bound to grow because of the benefits it offers, particularly across the industrial and commercial user segments. It will be driven by powerful underlying fundamentals such as the rising cost of conventional power, falling solar power costs, high solar irradiation and growing environmental concerns. International agencies like IFC, OPIC are now keenly looking for supporting renewable energy projects including solar rooftop in India. These factors, coupled with the government’s increased focus on promoting decentralized sources of energy, should result in India becoming an important market in the solar space.
IREDA, being a leading lender for RE, will play a very important role and would take a lead in financing solar projects with highest market share in the country in the next five years.