Goyal Asks PFC, REC to Focus More on Funding Renewable Energy Projects
The government has asked state-run Power Finance Corp (PFC) and Rural Electrification Corp (REC) to expand focus on funding renewable energy projects. “I have asked REC and PFC for a presentation on special focus products on renewables,“the minister for power, coal, renewable energy and mines, Piyush Goyal, said. The government is contemplating a $1 billion (`6,700 crore) fund to finance renewable energy projects, he added.
“I am waiting for the interest rates to come down further which would be the benchmark for the equity fund that we are preparing for the sector,” Goyal said.
The two companies have recently reduced their interest rates to renewable energy projects. REC lends to such projects at rates between 10.5% and 11.5%, depending on factors like project viability and promoter's strength. Rates on loans to conventional and hydropower projects are higher at 11.75% to 13.40%.
The move is aimed at giving a boost to the renewable sector as well as utilising the cash that the two financiers will receive in lieu of loans given to state-run power distribution companies post implementation of the Ujwaldiscom Assurance Yojana (UDAY). Under the UDAY debt recast scheme, REC and PFC will recover their existing debt exposure to state discoms in cash. The two have an exposure of more than $20 billion to these distribution firms. The companies plan to utilise the cash to finance energy projects, mainly green energy projects such as solar, wind and biomass plants.
Lack of new conventional coal and gas projects by private developers has prompted the two companies to shift focus to renewables. Currently, such energy projects constitute nearly 10% of the loan portfolio of REC and PFC.
Goyal said Rajasthan and Haryana have progressed well in revival of their distribution companies.