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Published on January 9th, 2011 | by Mridul Chadha


German, Japanese Banks to Offer $630 Million in Renewable Energy Loans to India

January 9th, 2011 by  

The Indian Renewable Energy Development Agency (IREDA) will soon enter agreements with banks in Germany and Japan to access over $630 million to be used for the promotion of renewable energy projects in India.

IREDA is one of the nodal agencies that provides monetary help for setting up of renewable energy infrastructure in India. It was established in 1987 under the administrative control of the Ministry of New and Renewable Energy. Its main function is to provide soft loans for renewable energy-based power plants and energy-efficiency projects.

The agency is likely to sign an agreement with the German KfW bank in February to get access to soft loans worth over $260 million. It is also likely to sign a deal with the Japan International Cooperation Agency in March for loans worth over $360 million.

India has outlined ambitious goals for expanding its renewable energy infrastructure over the next few decades. The government has announced policies to support the growth of solar energy projects, wind energy projects, small hydro power projects, waste to energy projects and projects based on other clean energy technologies.

The National Solar Mission is the central guiding policy initiative for growth of solar energy infrastructure in India. In addition, there is a National Mission on Enhanced Energy Efficiency which outlines various market-based approaches to increase industrial energy efficiency.

The government also provides subsidies to various entities in the clean energy sector. Subsidies are provided to the project developers in the form of generation-based incentives or premium tariff rates or tax benefits; subsidies are provided to power distribution companies; tax benefits are offered to equipment manufacturing companies to ease import of critical technology and promote indigenous development and financial help is also provided to consumers for procuring clean technology products.

IREDA also provides funds for government-run projects like off-grid rural electrification programs and distribution of solar lighting systems to poor families. The agency has already sanctioned $425 million worth of loans this year, a 26 percent increase from last year.

Due to the pro-investment policies being followed by the Indian government several international investors are looking to invest in the renewable energy boom that is underway in the country. In addition to the incentives provided by the central government, several state governments are offering additional benefits to the investors.

Other international investors like US Import-Export bank have also shown interest in providing funds for large-scale renewable energy based power plants. Last year, IREDA signed loan agreements worth $120 million with the French Investment Agency and Nordic Investment Bank.

Image: Image: Amaresh S K (Flickr)/ CC

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About the Author

currently works as Head-News & Data at Climate Connect Limited, a market research and analytics firm in the renewable energy and carbon markets domain. He earned his Master’s in Technology degree from The Energy & Resources Institute in Renewable Energy Engineering and Management. He also has a bachelor’s degree in Environmental Engineering. Mridul has a keen interest in renewable energy sector in India and emerging carbon markets like China and Australia.

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