IREDA replaces SECI as the implementing agency for VGF-based solar projects

The Ministry of New and Renewable Energy (MNRE) has issued amendments regarding the setting up of 12 GW of solar projects with viability gap funding support (VGF) by central public sector undertakings (CPSU) for self-use or use by government entities. As per the latest amendments, the power produced by the government entities can be used for self-use or use by government entities either directly or through distribution companies at the mutually agreed rate of Rs 2.80 per kWh. This rate would include all the charges, namely, wheeling and transmission charges, point of connection charges and losses, and cross-subsidy charges, among others. Earlier, as per the existing clauses, the rate was fixed at Rs 3.5 per kWh. The Indian Renewable Energy Development Agency Limited will now carry out the bidding process. Previously, the Solar Energy Corporation of India was the implementing agency for this programme.

India is looking at an investment of about $100 billion to achieve the renewable energy target of installing 175 GW by 2022. Of this, about 30 per cent is to be procured through equity and 70 per cent through debt. The current state of the banking sector in India is precarious. Many banks are under prompt corrective action, leaving only a handful to furnish debt for various sectors. As a result, limited funds are available and few projects are able to find the requisite financing. Meanwhile, high interest rates charged by banks due to the perceived risk of renewable energy projects make the situation worse. This puts the onus of funding essential projects on non-banking financial companies (NBFCs). The Indian Renewable Energy Development Agency (IREDA) is one such NBFC that is spearheading renewable energy financing in the country to drive capacity installations. IREDA is a Miniratna Category I PSU under the Ministry of New and Renewable Energy. Set up in 1987, the company has been engaged in developing projects in the alternative energy segment and extending financial assistance to them. In 2018-19, the company mobilised funds of around Rs 10.1 billion with private placement in the Indian market. It also raised around Rs 1.5 billion through the placement of bonds in the sector.

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