India-based Power Finance Corporation, a state lender to electricity utilities, has reduced its interest rates for renewables projects by 50 basis points, equating to a 0.50% cut.
Power Finance claims to have approved INR23.13 billion (US$430 million) for 611MW of renewable capacity in the year ending March 2012. According to Bloomberg, the company has lent a total INR53.73 billion to wind, solar and hydro projects.
In December last year, a report by the Climate Policy Initiative and the Indian School of Business found that high interest rates and relatively short-term loans for renewable energy projects in India adds 24-32% to the cost of developing renewable energy projects in India. This makes it more expensive than in either the US or Europe.
The revised rates apply to projects under the Ministry of New and Renewable Energy’s Jawaharlal Nehru National Solar Mission and will be effective 1 February 2013.
Jasmeet Khurana, Consultant, Bridge to India, agrees that PFC is sending out the right signal to its peers. However, he also notes that, “It is not a significant development from a solar project developer’s point of view as there are other avenues of international and Indian debt finance that can offer better terms.”
However, the Indian market is currently in disarray due to the uncertainty surrounding the row over domestic content restrictions on imported modules that is now awaiting a resolution from the WTO.