Indian solar power developers are struggling to find cheap sources of finance, slowing the process of switching to greener technologies.
“There are very limited options for raising debt financing from abroad (for solar power developers in India). Typical sources include multi or bilateral agencies such as IFC, ADB, US Exim, KFW, OPIC and others. But all these agencies have long and costly credit assessment processes and that’s why such financing is usually viable only for large projects of over 100 MW,” Vinay Rustagi, Managing Director at consultancy firm Bridge To India, told BusinessLine.
Typically, while foreign money has been coming into the solar power sector from the US and Western Europe, recently Japan and China have also showed interest, according to Rustagi.
Most India-based solar power developers get financing at 11 per cent while those with access to foreign funds get it at much cheaper rate of 7-8 per cent; sometimes even lower.
As a result, India is insisting that climate funding be an integral part of any agreement as part of the 2015 Paris Climate Conference so that companies have access to cheaper finance.
“There are indications that efforts may be made by some rich countries to keep climate funding out of the legal text and float a separate best endeavour paper on it. But this is not acceptable to us,” an official in the Ministry of Environment, Forests and Climate Change said.
“We are not asking for just grants. Loans on easy terms would also go a long way in helping the process of financing projects,” the official added.
Although developed countries had agreed to set up a Green Climate Fund worth $100 billion by 2020, not much has been committed so far and there seems to be some hesitation amongst nations to take on binding commitments in the area in Paris.
Meanwhile, India also will not accept any dilution in the ‘Common but Differentiated Responsibilities’ (CBDR) principle of the United Nations Framework Convention on Climate Change.
The CBDR calls for developed nations, which have contributed the most to climate change so far through their high emissions, to take on higher commitments to cut carbon emissions.
“Any fair agreement to combat climate change has to be based on the principle of differentiation. Although India has not contributed to climate change, it is ready to play an important role in combating it. The countries that have actually hurt the global climate through their high emissions definitely have to do more,” the Environment Ministry official said.