India may soon have a green bank which shall enable easy access to cheap international funding for its ambitious renewable energy targets.
According to recent media reports, the Indian government is planning to convert the Indian Renewable Energy Development Agency (IREDA) into a full-fledged green bank. Agency’s Chairman and Managing Director, Mr KS Popli, recently told media outlets that the agency would ‘retain its basic structure’ during and after this conversion.
Conversion of IREDA into a green bank will enable it to secure cheap international funding and will also open up a new debt financing avenue for project developers in India. With solar power tariffs falling rapidly conventional banks are increasingly becoming hesitant in lending to project developers; the recent bankruptcy protection filing by SunEdison, a major player in India, has only worsened the market conditions.
IREDA currently regulates and delivers incentives to renewable energy projects. The proposed conversion, being ‘fully backed’ by the Ministry of Power, shall allow it to disburse debt finance to projects. The Agency has already taken steps towards raising funds through green bonds.
In September 2015, IREDA launched tax-free bonds worth Rs 20 billion (around $307 million) to raise funds which would be used to finance renewable energy projects, including small-scale and rooftop solar power projects. In January 2016, it was reported that the Agency shall issue additional green bonds worth $260 million.
In the past, IREDA has signed agreements with the International Finance Corporation, KfW, the US Export-Import Bank, Japan International Cooperation Agency, and India’s Yes Bank to promote renewable energy funding.