According to reports, banks may restrict loans to Indian solar projects after the government fined 13 projects for delays, including one owned by Indian Oil Corp. (IOCL)
An inquiry found 13 of 20 projects in northwestern Rajasthan state missed their deadline, according to a list from the Ministry of New and Renewable Energy.
“All delayed projects were fined,” Tarun Kapoor, the ministry’s joint secretary, said by phone. Indian Oil didn’t immediately respond to an e-mail seeking comment.
The delays and penalties are a setback for lenders and may make it more difficult and costly especially for inexperienced solar companies to raise finance, said Bharat Bhushan, a New Delhi-based analyst for Bloomberg New Energy Finance.
A shortfall in commercial project finance could stall the solar industry in India, one of the biggest growth markets, according to SBI Capital Markets Ltd. India will need at least $3.2 billion of debt finance in the next three years to complete already-announced solar projects, according to the Asian Development Bank.
The 13 delayed projects face a total penalty of about 446 million rupees ($8 million), Bhushan calculated. Companies posted bank guarantees when they won contracts in 2010 that are forfeited in installments during the first three months of delays. Next, a daily fine of 100,000 rupees is levied for another three months. After that, the project is canceled and the company loses its contract, according to program rules.
Four companies lost their entire deposit and are being fined daily, Kapoor said without naming them. Four more companies have gone to court to protest the fines, according to the list.
Rajasthan state suspended officials who earlier issued false completion certificates to delayed projects, Kapoor said.
The projects are among the first awarded in India in a 2010 national auction. Of the 140 megawatts of photovoltaic plants due to be completed by now, 15 megawatts or three projects are still pending, Kapoor said.