Despite the robust government backing, the market is hindered by high capital requirements and the risks posed by the lack for grid parity of large solar farms. Most developers faced issues with financial closure. There is an overall reluctance on the part of financial institutions to lend to solar projects. Banks are asking for large collaterals to the extent of over 110 per cent and are reluctant to finance purely on the basis of power purchase agreements.
In addition, the interest rates are also very high with some banks funding at rates as high as 15-16 per cent. Market participants will have to sort out the affordability issue if they desire wide- scale deployment of rural electrification programmes.
Policy and procedural delays are causing major problems in completion of land transfer and this has a domino effect, leading to delays in financial closure and consequently delays in commissioning of the project. In addition, there are delays in getting clearances, like the Pollution Clearance Certificate from the concerned agency. Besides, there is no clarity on the approvals required. For instance, few people know that projects under 5 MW do not require a pollution clearance certificate.
The country also lacks a well developed transmission and distribution (T&D) network for evacuation of solar power from remotely located plants.
These issues need to be addressed to ensure that the solar market in the country continues on its growth trajectory. —Rajesh Menon, deputy director general,
Confederation of Indian Industry (CII)