Govt. Working on Framework to Attract Investments in Solar Energy Projects

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FICCI’s reports on Solar Financing, Securing the Solar Supply Chain and Handbook on Indian Solar sector released

NEW DELHI:  Tarun Kapoor, Joint Secretary, Ministry of New and Renewable Energy, Government of India today released FICCI reports on ‘Financing Solar Energy’ and , ‘Securing the Supply Chain for Solar in India’ and Indian Solar Handbook and Directory.

The reports by the industry come at a time when the solar sector in India is undergoing tough times due to lack of appropriate financial mechanisms, low cost financing alternatives, and regulatory certainty. Addressing the launch function, Mr. Kapoor said, “Lack of finance is the most critical issue faced by the National Solar Mission.

The Ministry of New and Renewable Energy (MNRE) is actively engaging with the Ministry of Finance, financial institutions and banks to devise ways to attract investments in this sector. Banks do not feel secure in lending to renewable energy projects as they are not conversant with the sector.

To overcome this lacuna, the MNRE is now conducting workshops to help them better understand the nuances of the sector.” He said that there are foreign financial institutions which are interested in investing in renewable energy but are discouraged by the policies.

“We need to frame policies keeping in mind the interests of these investors and provide them an environment which makes them feel safe about their investments,” Mr. Kapoor added. Mr. Kapoor informed that rooftops solar panels and many large projects are in the pipeline, details about which would be announced soon. Since the launch of the National Solar Mission in 2010, the total installed solar capacity in India has gone up to 1.7 GW. At the same time the cost of solar power has reduced significantly.

However, the sector faces many challenges as it struggles to compete with conventional power projects to avail low cost finance and create sustainable demand. The FICCI reports provide key industry recommendations for the growth of the solar sector in India.

Mr. V Saibaba, Chairman, FICCI Solar Energy Task Force, said that one of the biggest challenges solar projects in India face is the availability of cheap finance. Due to the higher prevailing costs, these projects have longer payback period.

Lenders are also wary about off-taker risks due to the financial health of SEBs.

Additionally, banks in India face structural challenges due to their sectoral exposure limits. Given these challenges, the FICCI Report on Financing Solar Energy makes the following recommendations to improve the financing of solar energy projects: Making renewable energy as an independent sector (separate from Power sector) as many banks have reached their sectoral exposure limits. Putting solar energy under priority sector Improving liquidity through a solar energy fund, solar bonds, refinancing by pension/insurance funds, longer duration construction loans Lowering the Cost of Debt by eliminating the tax on interest received by banks and relaxing ECB norms.

Addressing the performance of state utilities and improving their fiscal health Speaking on the solar supply chain, Mr. Deepak Thakur, Chair, FICCI Subgroup on Securing the Solar Supply Chain, said that besides low cost financing, the other important factor for the growth of the solar sector in India is the need to build a domestic supply chain in the country.

There is a strong need to incentivize investments in creating the domestic supply chain with help from both domestic and global players, and to facilitate collaborative arrangements for enhancing R&D efforts. There is also a strong case for international companies with extensive technology and experience globally to participate in building a strong supply chain in India and be part of India’s solar growth story. The report recommends the following steps:

Capex support for solar manufacturing

Integrated solar manufacturing hubs

Power to energy intensive segments of solar manufacturing

Tax and duty rationalization/exemption

Promoting cluster R&D FICCI also released the Indian Solar Handbook and Directory, a compendium for information on the policy and institutional framework for solar energy in India and the stakeholders involved in the Indian Solar Energy space.

The Handbook consists of information on solar market, central and state government policies, regulatory overview, nodal agencies as well as case studies highlighting successful stories. The Directory portion provides information on Equipment Manufacturers, Project Developers, System Integrators, Sales and Marketing companies, and energy service companies in the field of solar energy.

Dr. Arbind Prasad, Director General, FICCI, said that FICCI believes that solar energy can play a pivotal role in enhancing India’s energy security and creating greater energy access. Solar energy occupies a critical place in India’s power strategy due to its scalability, easy deployability and availability of abundant sunshine. However, harnessing solar for the country’s long term benefit can only happen if an ecosystem can be built and made to thrive in the country. Financing has been a critical bottleneck for the solar projects in India and the lack of low cost financing needs to be addressed urgently.

FICCI Solar Energy Task Force

FICCI Solar Energy Task Force was launched in March 2010, with the launch of Jawaharlal Nehru National Solar Mission (JNNSM) to provide a platform for the solar energy sector to deliberate on policy and regulatory issues and advance interests of the sector at domestic and global platforms. The Task Force is represented by 32 members from the entire value chain of the solar industry including manufacturers, project developers, system integrators, EPC companies, raw material suppliers as well as the certification agencies. The members of the Task Force come from both solar PV and solar thermal sub sectors, representing both grid-connected and off-grid players, from public as well as private sector, and Indian as well as international companies.

Note : Weblink: 1. FICCI Solar Energy Task Force Report on Financing Solar Energy http://ficci.com/publication-page.asp?spid=20295

2. Report on Securing the Supply Chain for Solar in India http://ficci.com/publication-page.asp?spid=20294

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