Power Minister Proposes Removal of Priority Sector Lending Limit for RE Sector

Indian Power and new renewable energy minister R K Singh yesterday pitched for removal of priority sector lending limit for green energy projects.

In the meeting, it was decided that MNRE would follow up with RBI for removal of the priority sector lending limit for RE sector. This will encourage the Public Sector Banks to lend more for RE projects and help RE developers access easy finance,” the Ministry of New and Renewable Energy said in a statement.

He further said that “current tariff rates discovered for various RE projects are viable as the maintenance/running cost of RE projects is very less in long run,” and added that, “With time, the cost of RE technology is coming down whereas the efficiency of RE equipments’ is improving day by day. So the low tariffs are not an aberration.”

These issues came up for discussion during a review meeting by Singh with the industry players, banks and financial institutions and finance ministry officials. In the meeting, RK Singh also asked the Banks/Financial Institutes to categorize RE as separate sector different from power sector so that funds would flow to RE projects and also requested banks to come forward to lend to RE sector.

Reports earlier yesterday points out that MNRE has asked the Reserve Bank of India (RBI) to separate renewable energy (RE) from thermal power in its regulations in order to have different sectoral caps. The Indian Power sector has been loaded with non-performing assets (NPAs) worth Rs 2 trillion, and a non-functional capacity of 40,000 MW. This has made many financial institutions wary of power sector.

On the issue of delays in land acquisition, the minister said SECI will tie up with state governments so that land becomes available on lease eliminating the need for any upfront payment for the land. SECI will also tie up transmission while floating bids. Also, banks and financial institutions were asked to tie up with SECI for offering predetermined loans to successful bidders.

During the meeting, discussions were held on GST issues on RE equipment or components and the Department of Revenue was requested to place an appropriate proposal before the GST Council. Singh said in order to promote manufacturing in the RE sector the government would look at corrections in duty structure and approval of a scheme to provide a capital subsidy.

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