A report shows there was no public sector bank among the top 10 financers to the sector
L&T Finance Holdings was the biggest lender to renewable energy projects in 2018. The company lent ₹7,650 crore to renewable energy projects, according to a recent report of New Delhi-based research and analysis body, Centre for Financial Accountability (CFA).
There was no public sector commercial bank in the top 10 lenders to the renewable energy sector. In contrast, State Bank of India was the top financier to coal-fired projects, having lent ₹743 crore, the report, which went into 54 power projects that achieved financial closure in 2018, said.
The report notes that the top five renewable energy companies that received loans were: ReNew Power (₹2,301 crore), ACME (₹2,167 crore), Azure Power (₹1,910 crore), Adani Green (₹1,752 crore) and Alfanar Energy (₹1,500 crore).
In all, renewable energy projects received ₹18,263 crore, or $2.64 billion, of loans in 2018.
IFC, part of the World Bank group, said in 2017 that India would need $450 billion to finance renewable energy projects up to 2030. Assuming a 70:30 split of debt and equity, clean energy companies would need $315 billion of loans in the next 12 years. That’s $26 billion a year.
This means that loans need to be paid back by the borrowers and re-lent faster.
A recent report of the Climate Policy Initiative, a New Delhi-based research and analysis organisation, noting that India’s clean energy sector continues to attract “significant investment”, observed that there can be serious challenges to the growth trajectory, if the capital deployed in existing projects is not recycled and if new sources of capital are not included.”
The CPI suggested two ways of increasing the depth of lending. One, existing lenders could securitise their loans (or, sell off the future cash flows from existing loans), and two, energy companies could borrow directly from the market. It has called for measures to protect investors and lender in case of defaults by borrowers — such as guarantee mechanisms, where a third party steps in and says, ‘if he doesn’t pay, I will, on his behalf’.