The government has ruled out writing to the RBI seeking priority status for renewable sector for limitless borrowing, ET Now learns from government sources.
“We believe there is enough liquidity in the financial system for renewable companies to tap into, and have thus decided to not write to the RBI to grant priority sector status,” the government official said.
This had been one of the key demands of the renewable energy companies like Suzlon, ReNew Powet and Inox Wind that met with the Power Minister RK Singh on September 19 in New Delhi.
At a time, when banks are shying away from investing in renewable projects, it has been a long standing demand of the industry to give priority status to trigger cash flow into the sector. Banks on the other hand have been reluctant to fund renewable projects due to low tariffs despite a new auction regime, power evacuation issues and NPAs in the thermal sector. Solar tariffs has been recently capped at Rs. 2.5/unit by Ministry of New and Renewable Energy.
Low tariffs discovered in clean energy bids have raised a question on companies continuing to submit bids that cast a shadow over project viability. Implementation and operational costs around projects coupled with low tariffs are deterring banks from lending.
New Delhi’s hesistance to go the extra mile to fetch funds may make it difficult for the Modi government to achieve its ambitious target of 175GW of renewable energy. While 71GW has been installed already, investments over $100 bn are required to install the remaining capacity.