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Rituraj Baruah, Utpal Bhaskar

Ireda eyes DFI status to get green finance at lower rates

DFI status can help Ireda access foreign funding, grants and loans easily and in larger quantum compared with other public financial institutions.. Bloomberg

DFI status helps financial institutions raise funds at lower rates, helping them lend further at cheaper rates. The plans come after state-run Power Finance Corp. and REC Ltd applied for the DFI status focusing on green finance.

“Ireda also is thinking about it (DFI status)...It will increase their access to low-cost funds for green projects," said a top official in the know of the developments.

DFI status also helps a financial institution access foreign funding, grants and loans easily and in larger quantum compared to other public financial institutions. DFIs primarily cater to social and physical infrastructure projects with long gestation periods.

An institution like DFI to provide funds with a commensurate tenor is likely to present a viable alternative for funding infrastructure.

Further, DFIs can be adequately capitalized by sovereign-backed funds, alternative routes such as capital gains, tax-free bond issues, external borrowings, and loans from multilateral agencies.

Queries sent to the ministry of new and renewable energy and Ireda on Sunday evening remained unanswered till press time.

Recently, Power Finance Corporation Ltd and REC Ltd, which are under the administrative control of the union ministry of power, also applied for the DFI status with a view to supporting India’s net zero goals.

In September, REC said that the government is considering DFI status for the company, which would be the financial company to steer global climate funding and net zero investment in the country.

According to estimates, there is a requirement of around $3.5 trillion by FY50 and around $10 trillion by 2070 for transitioning towards a net-zero economy. The requirement of such huge funds comes against the backdrop of Prime Minister Narendra Modi’s commitment at COP26 last year to achieve 500GW of installed renewable energy capacity by 2030 and net zero carbon emission by 2070.

The Centre has been making efforts to boost financing of renewable energy projects, and in January this year, the Cabinet Committee on Economic Affairs approved an equity infusion of 1,500 crore in Ireda.

An official statement then said that the equity infusion would help in the employment generation of approximately 10,200 jobs per year and reduction of emission reduction of around 7.49 million tonnes of CO2 per year.

The fund infusion was aimed at aiding additional loans of around 12,000 crore to the renewable energy sector to set up an additional capacity of 3,500-4,000MW.

Ireda, a ‘Mini-Ratna’ company under the administrative control of the ministry of new and renewable energy, was set up in 1987 to work as a specialized non-banking finance agency for the renewable energy sector.

At the end of FY22, Ireda’s net outstanding loans stood at 33,930.61 crore, and it had raised a total of 32,881.18 crore through equity capital and debt, according to its annual report for the fiscal. Its disbursements in the last financial year rose 82% to 16,070.82 crore from 8,828.35 crore in FY21.

The consideration for turning into a DFI also comes at a time when the company is planning to expand into newer areas in the renewable energy space. In his message to Ireda shareholders in the annual report for FY22, chairman and managing director Pradip Kumar Das said that the company is set to support sustainable energy solutions under the proposed National Hydrogen Energy Mission in sync with the government’s vision for hydrogen energy utilization.

Further, with its current present spread across southern, western and northern regions of the country, the company is also exploring capacity addition in the eastern and northeastern regions, he had said.

The company also plans to sell green bonds in the international and domestic markets to garner capital for onward lending.

rituraj.baruah@livemint.com

ABOUT THE AUTHOR

Rituraj Baruah

Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
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