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Government may ask RBI to classify renewable energy projects under priority sector lending

Source Name: 
The Economic Times
Source Url: 
https://economictimes.indiatimes.com/industry/energy/power/government-may-ask-rbi-to-classify-renewable-energy-projects-under-priority-sector-lending/articleshow/65882139.cms

The Ministry of New and Renewable Energy (MNRE) is expected to write to RBI, seeking to bring renewable energy projects under priority sector lending, senior officials said. 

This comes as stress in the conventional power sector is reflecting negatively on the renewable energy sector, and project developers raise concerns around bankers being reluctant to fund renewable energy projects. 

Minister of power, and new and renewable energy R.K Singh taking cognizance of the matter called a stakeholders meet in the city on Wednesday. 

“We are committed to remove the obstacles in financing of renewable energy projects. We have taken inputs from different stakeholders. One suggestion was that priority lending should be done for renewable energy projects and without any limit,” said Anand Kumar, Secretary, MNRE. 

At present, solar rooftop projects are under priority sector lending category, but the quantum of funding is restricted to Rs 15 crores, officials said. 

“Inclusion of renewable energy in the priority sector lending has been a long-pending request from the industry, which is now being discussed and is now being deliberated from both sides,” said a spokesperson for solar power developers association. 

Non-performing assets (NPAs) in the thermal power sector is impacting investments in the renewable energy projects, and lending sentiment for the power sector as a whole has been dampened, an official present at the meeting told ET. 

“Power and renewable are different sectors, if a bank says that there is NPA in power and they will not finance renewable energy (projects), that’s not fair. It should be brought to the notice of the power minister in that case,” Kumar added. 

ET reported on September 18 that Indian banking institutions were not willing to fund renewable energy projects. Industry players cited falling solar tariffs, power evacuation issues among reasons behind the wavering interest of lenders in the clean energy sector. 

Developers also brought up the issue of raising additional funds on account of safeguards duty, and Singh asked the industry to write to MNRE if banks are not financing until pass-through is approved by the regulator, a source present at the meeting on Wednesday said. 

The government may explore possibilities of interim support through Indian Renewable Energy Development Agency, Singh told stakeholders. 

The power ministry has allowed project developers to pass on additional project costs on account of safeguards duty to distribution companies. 

The finance ministry in July this year notified an order to impose 25% safeguard duty on solar panels and modules imported from China and Malaysia for a period of one year. The quantum of duty would be reduced to 20% for the next six months, and 15% for the following six. 

IPPs on Wednesday also raised issues regarding payment delays by distribution companies and their demand for 2-3% rebates on delayed payments, to which the power minister did not respond, the source added.