Parliamentary panel asks Renewable Energy Ministry to seek enhancement of priority sector lending limits

Despite the RBI having categorised it as a priority sector, loans up to only Rs 30 crore are provided for renewable energy projects and a high-level Parliamentary panel has directed the Renewable Energy Ministry to pursue the matter of enhancement in the loans limit for the sector with the Finance Ministry as well as with the RBI.

The Standing Committee on Energy, in its report on financial constraints in the renewable energy sector, which was presented in Parliament during the recently concluded monsoon session, noted that the ministry itself has stated to it that Rs 30 crore loan is not sufficient as it can take care of only small sized renewable energy projects.

Also, the ministry further informed the panel that many banks which are not conversant with renewable energy projects, may not offer even this small financial assistance and may cover their priority sector lending obligations with projects from other sectors.

The panel, therefore, has suggested that the Renewable Energy ministry should sensitise banks should be sensitised about the importance and benefits of of the sector, so that they don't overlook this sector in their priority sector lending.

Apart from this, the renewable energy sector also faced problems of realising revenue on time, owing to "exorbitant delay" in receipt of payments from various power distribution companies or discoms.

This has been causing problems in debt servicing and thus downgrading of the asset to a non performing asset (NPA). The ministry apprised the Parliamentary panel that delays are typically longer for renewable developers than conventional generating companies, even if they are within the same utility.

The committee has been apprised that while discoms have been claiming rebates for payments before due dates as per terms of power purchase agreements (PPAs), they are reluctant to pay compensation or penal interest to the renewable energy developers for delayed payments payable in the form of late payment surcharge.

The panel therefore has suggesed that the renewable energy ministry should ensure proper implementation of Electricity (Late Payment Surcharge) Rules, 2021 so that the developers get compensated for the delay caused by discoms in payment of dues.

Also the ministry should ensure that every PPA signed by renewable energy developers with discoms has the provision of payment security instrument and the same is implemented in letter and spirit. In addition to this, the ministry should pursue the states and discoms to clear dues on the first in – first out basis so that the oldest dues are paid first.

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