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India government earmarks Rs 15 bn for solar projects over next two years

As readers of Panchabuta are aware,  Ministry of New and Renewable Energy (MNRE) has formulated a scheme on financing of off-grid and decentralised solar (Photovoltaic and Thermal) applications as part of the Jawaharlal Nehru National Solar Mission(JNNSM).

The scheme provided for routing the capital subsidy and the interest subsidy on bank loans availed by the clients from the banking system for solar energy conversion/ user systems and devises under this scheme through National Bank for Agriculture and RuralDevelopment (NABARD). “The Capital Subsidy – cum- Refinance Scheme for installation of solar off-grid (photovoltaic & thermal) and Decentralised Applications” is being introduced to enable the banking system (Commercial Banks and RRBs eligible for drawing refinance from NABARD) to avail of the financial resources including the subsidies on behalf of their borrowers for creation of relative assets.

There have been discussions in the recent past whether funding at 5% constituted any kind of violation of the base rate rules of the RBI under which no loans except few exceptions can be offered below the base rate of a bank.

Subsequently, the Reserve Bank today said banks financing power generation equipment under the Jawaharlal Nehru National Solar Mission (JNNSM) at a concessional 5 per cent interest rate is not violation of norms.

According to reports, The government would dole out Rs 1,500 crore over the next two years to banks and finance companies to lend money to solar energy projects at a generous 5% interest rate, a top government official said.

The money would be lent to small solar projects adding up to 200 MW by companies like SIDBI , NABARD and National Housing Bank . These lenders would be provided interest-free loans by the Indian Renewable Energy Development Agency (IREDA), an arm of the renewable energy ministry. The agency would also provide funds to state-run banks in urban areas at 2% interest rate.

This would allow conservative bankers to lend more to renewable sectors, said Debashish Majumdar , Chairman and Managing Director of IREDA, a non-banking financial institution that provides term loans for renewable energy and energy-efficiency projects. The projects are coming up under Phase 1 of the national solar mission. The mission aims to add 20,000 MW of solar power by 2022.

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