The government has lowered the estimated borrowing target of Indian Renewable Energy Development Agency (IREDA) — the key lender to clean energy sector and also called India’s green bank — by a massive 34 per cent to ₹8,043.31 crore in Budget 2017.
The Revised Budgetary borrowing for financial year 2016-17 stood at ₹ 12,212.60 crore. The target for financial year 2017-18 is even lower than the ₹9,118.85-crore borrowing target set under Budget 2016-17.
Vishal Jain, Chief Financial Officer, 8minutes Future Energy, said the lowered borrowing targets for IREDA will put strain on clean energy financing. He said, “Clean energy is a capital intensive sector and we have to manage our borrowings efficiently. The lower availability of capital will increase our borrowing costs and this will directly impact consumer tariffs.”
Currently, IREDA raises funds from international development agencies such as the German government-owned KfW and Asian Development Bank. IREDA also builds its corpus by issuing bonds for clean energy development projects. It hedges its borrowing in foreign currency denominated financial instruments. Since IREDA’s foreign borrowings are backed by the Indian government, development agencies and bond holders are assured of returns.
IREDA then routes its borrowed corpus for financing clean energy projects in India. The PSU’s lowered borrowing can reflect in lower lending.
But, IREDA is not the only institution that facilitates development financing institutions to extend support for India’s clean energy mission.
Hari Natarajan, CEO at Clean Energy Access Network, said, “There currently are sources beyond IREDA for financing clean energy development in India such as the solar rooftop line (funding) from the World Bank with the State Bank of India and from the Asian Development Bank with the Punjab National Bank”.
However, Mayank Shah, Chief Financial Officer at Waaree Energies, is optimistic about the clean energy sector.
He said, “Green bonds will come to the aid of the clean energy sector’s need for financing. Also, a large number of global renewable energy focused funds are looking to invest directly in India’s clean energy sector.
“Further, development financing agencies have been approaching banks directly for disbursing these loans in India.”
While the diversification of funds augers well for the clean energy sector, IREDA’s role seems diminished for now.