Loans for renewable energy projects are only available up to Rs 30 crore, despite the RBI classifying it as a priority sector, and a high-level parliamentary panel has instructed the Renewable Energy Ministry to pursue the issue of an increase in the loans limit for the sector with the Finance Ministry as well as the RBI.
In its report on financial barriers in the renewable energy sector, which was delivered to Parliament during the just-concluded monsoon session, the Standing Committee on Energy noted that the ministry itself had informed it that a loan of Rs 30 crore was insufficient because it could only handle small-scale renewable energy projects.
The ministry also told the panel that many banks may not provide even this little amount of financial support since they are unfamiliar with renewable energy projects. Instead, they could use projects from other sectors to fulfill their lending commitments to the priority sector.
Therefore, the panel has recommended that the Ministry of Renewable Energy educate banks on the significance and advantages of the industry so that they do not neglect it while making loan decisions for their priority sectors.
In addition to these issues, the renewable energy industry has had issues with timely revenue realization due to “exorbitant delay” in payments from different electricity distribution firms or discoms.
Due to issues with debt payment, the asset has been downgraded as a non-performing asset (NPA).
Even though they are part of the same utility, delays for renewable developers are sometimes greater than for traditional generating businesses, the ministry informed the Parliamentary panel.
The committee is aware that while discoms have been claiming rebates for payments made ahead of schedule in accordance with the terms of power purchase agreements (PPAs), they have expressed reluctance to compensate renewable energy developers or pay them penalties for late payments in the form of late payment surcharge.
The panel has consequently recommended that the Ministry of Renewable Energy guarantee appropriate execution of the Electricity (Late Payment Surcharge) Rules, 2021 in order to provide compensation to developers for the delay in payment of dues brought on by discoms.
The government should also see to it that a payment security mechanism is included in every PPA that renewable energy producers sign with discoms and that it is carried out in word and spirit. Additionally, in order to ensure that the oldest dues are paid first, the ministry should press the states and discoms to clear dues on a first-in, first-out basis.
