'IFCs have become very active in the RE space'

Manish Chourasia, CEO – Tata Cleantech Capital Ltd, speaks about the role of infrastructure finance companies (IFCs) in supporting the government’s ambitious renewable energy targets in an interview with Monica Chaturvedi Charna...

- Monica Chaturvedi Charna

Kindly elucidate on the role of infrastructure finance companies (IFCs) in promoting India’s RE capacity target of 175 GW.

The current government’s ambitious target of increasing the renewable energy capacity 3.5 times by 2022 (from 50 GW currently to 175 GW) would require additional funds in the range of US$ 130150 billion, depending on the global price scenario of solar and wind technology. Of this, 25-30% is expected from sponsors’ equity and the rest through debt instruments. Traditionally, debt financing for clean energy projects was provided primarily by commercial banks and a few non-banking financial institutions (NBFCs). However, in last 2-3 years, IFCs have become very active in the renewable energy (RE) space and their share in funding has increased significantly. As funding requirement to the sector is huge, IFCs will have to play a significant role. Banks alone will not be able to meet the huge funding requirement of this sector as their exposure to the traditional power sector is already large.

What are the key drivers for IFCs to invest in India’s clean energy programme?

There are essentially 3 key drivers for IFCs to invest in the clean energy segment: a) Clean energy is now a survival imperative for humankind; b) Effective financial intermediation is fundamental to the growth of this business in India; and c) Exponential growth in technology is slowly but surely eliminating subsidy element in this business. Even with all the pledges made in the 21st meeting of the Conference of Parties (COP 21) of United Nations Framework Convention for Climate Change (UNFCCC), the temperature rise would be 2.7oC, while the goal of UNFCCC is to restrict it to 2.0oC positively and 1.5oC on best effort basis.