MNRE introduces capital subsidy scheme for solar projects

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By Srabani Sen

To promote off-grid applications of solar energy, both photovoltaic (PV) and solar thermal, the Ministry of New and Renewable Energy (MNRE), Government of India, has introduced a subsidy linked credit scheme that offers financial incentives in the form of capital and interest subsidy on loans. These can be availed from financial institutions by the target clientele.

With over 300 clear sunny days available annually in India, there is a huge potential to tap, store and retrieve solar power, which could amount to much more than the current power requirements. However, the actual exploitation of solar power is insignificant when compared to other energy resources. Also, solar powered systems and devices have remained underutilised mainly due to high unit costs.

Therefore, the government is taking several initiatives to address this challenge, and provide a framework for expanding solar energy markets by bringing down the costs. One such initiative is the Capital Subsidy-cum-Refinance Scheme, which provides for routing the capital subsidy and the interest subsidy on bank loans availed by the eligible borrowers through the National Bank for Agriculture and Rural Development (NABARD). This scheme is being introduced to enable commercial as well as government banks to draw refinanced funds from NABARD and avail financial resources including subsidies, on behalf of their borrowers.

Scope of the scheme

The currency of the scheme will be co-terminus with phase I (initially up to March 2013) of the Jawaharlal Nehru National Solar Mission, and will cover projects specifically approved by the MNRE’s project approval committee (PAC).

Capital subsidy

The quantum of capital subsidy and refinance would be made available as per the specifications of MNRE/ IREDA, from time to time. Currently, the capital subsidy would be to the extent of 30 per cent of the benchmark cost. For 2010-11, the benchmark price for PV systems with battery backup is considered as 300 per watt peak (Wp). For systems which do not use storage batteries such as water pumping systems, the installed PV system cost would be considered subject to a cap of 210 per Wp.

Loan period and rate of interest

Borrowers are required to bring in 20 per cent of the cost of the project as the margin money to access credit facilities from banks, to acquire the assets. Loans would cover the balance after factoring in the eligible capital subsidy, and would be extended with a repayment period not exceeding five years. They would carry an interest rate of 5 per cent per annum. No interest will, however, be charged by the financing banks on the capital subsidy component.

Commenting on the scheme, Chintan Valia, executive, marketing, Waaree Energies Pvt Ltd, says, “Through this schemes, the government is doing its best to promote the use of solar energy in a commercial way. I hope this scheme will not just remain on paper. If it is implemented properly, a lot of people can reap its benefit, and at the same time create awareness about an alternative energy source to the people who are not aware about it. The government should ensure that the benefits of this scheme reach the right people.”

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