India Seeks €1 Billion Loan From KfW For Rooftop Solar Power Projects

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India’s Ministry of New and Renewable Energy is seeking funds to significantly increase India’s rooftop solar power capacity under the National Solar Mission.

The ministry has approached the German development bank KfW for funding worth €1 billion to expand the rooftop solar power infrastructure in India. The plan is part of the new government’s overall policy to significantly boost solar power capacity and renewable energy infrastructure in the country.

The ministry plans to set up 1.5 gigawatts of rooftop solar power capacity across the country as part of the National Solar Mission. The ministry plans to disburse this funding through government bodies including Indian Renewable Energy Development Agency (IREDA) and Rural Electrification Corporation (REC).

While the Indian government has access to million of dollars through the National Clean Energy Fund (NCEF), the NCEF, launched in 2010, is funded through the tax on every tonne of coal produced or imported into India. Until early July this year, the tax on every tonne of coal was Rs 50 ($0.83), after which it was doubled to Rs 100 ($1.67).

Surprisingly, though, the fund has not been used for the purpose it was intended for. According to media reports, the fund is unwilling to offer loans at an interest rate of 4–5%. The current lending rate set by the Reserve Bank of India is 10–11%.

The ministry is, however, facing some issues regarding the disbursement and providing guarantee for the loan. The loans will be repaid in Indian rupees, which may depreciate over the next few years, affecting the value of the loan. Another issue is the recovery of loan if it is disbursed to individual property owners who wish to install rooftop solar power projects.

The new Indian government has set aggressive targets to enhance solar power capacity. The ministry recently issued a draft proposal to install 15 GW solar power capacity over the next five years. The government will also likely promote rooftop solar power projects in cities through feed-in tariff policies and the Solar Cities programme.

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