According to reports, India requires investment of over $13 billion in the next three years to meet the target of adding 9,000 MW of solar power in the second phase of the Jawaharlal Nehru National Solar Mission, the World Bank said.
In a report titled `Paving the Way for a Transformational Future: Lessons from JNNSM Phase I,’ the World Bank said the investment needs to come largely from scheduled commercial banks.
He said financing was a key challenge during the first phase and will continue to remain so during phase two.
In the first phase, finance came mainly from export credit agencies, multilateral financial institutions and some non-banking financial companies, not from commercial banks.
“Though the installed capacity of solar power rose from around 30 MW to more than 2,000 MW in three years, financing has been a serious impediment…Given that most infrastructure lending in India has been led by commercial banks, India will need the active participation of commercial banks to scale up to the levels envisaged,” he said.
“Government needs to design risk-reducing financing instruments such as sub-ordinated public finance in order to attract long-term commercial lending to ensure long-term viability. It should also facilitate appropriate technology deployment,” Khanna said.
The report suggests the government could offer financial solutions involving viability gap fund, generation-based incentives, credit guarantees, concessional credit lines to banks to lower interest rates and subordinated public finance to extend loan tenors.
Using public financing to extend the tenor of a loan and providing subordinated debt is the least expensive option to meet the objective of reducing the solar tariff to Rs 5.50 per unit, he said.
The World Bank is keen to financially support the government’s plan.
“We wish to financially assist the government, especially in ultra solar projects,” Khanna said.
The government plans to set up large solar parks and has identified regions in Rajasthan, Gujarat, Kargil and Ladakh for this purpose.