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Power projects

India is the only country in the world with a ministry – the Ministry of Non-Conventional Energy Sources (MNES) – established exclusively to regulate the development of renewable energies for national development. India ranks fourth among the world leaders in wind power capacity, after Germany, Spain and the US.

India offers various incentives to non-conventional power players setting up renewable energy projects including:

  • income tax exemption on power income for 10 consecutive assessment years;
  • exemption/reduction in excise duty for the renewable energy sector;
  • exemption from central sales tax for the renewable energy sector; and
  • Customs duty concessions on the import of material, components and equipment used in renewable energy projects.

In addition to these existing government incentives, India supports non-conventional power players, and substantial finance is being made available at low interest rates and moderately long moratorium periods by principal financing institutions, including the Indian Renewable Energy Development Agency (Ireda), Power Finance Corporation (PFC) and Rural Electrification Corporation (REC).

Ireda, under the administrative control of MNES, offers financial and technical assistance to prospective power players to establish commercially viable wind farm projects for renewable energy and energy efficient/conservation projects. Ireda makes assistance available at interest rates ranging between 8% and 9% in wind power projects, with a maximum moratorium period of 10 years, up to 70% of the total project cost. Rebates of 0.5% on interest rates are provided for timely payment of the loan and 1.5% if the borrower gains the security of a bank guarantee from a scheduled commercial bank.

Central and state sector utilities can avail of term finance for thermal and hydro generation projects, survey and investigation of power projects, system improvement and energy conservation schemes, and renovation and modernization of power plants from PFC, a pivotal financial institution subject to the control of the Ministry of Power, for up to 70% to 100% of the project cost. Private sector companies can obtain finance for up to 20% to 50% of the project cost. Additionally, PFC offers rupee term, foreign currency term, working capital, and bridge loans.

REC finances and promotes rural electrification projects all over the country, offering financial support to state electricity boards, state government departments, rural electric cooperatives, and private sector projects for rural electrification schemes, sponsoring them at interest rates ranging from 6.5% to 9.50% for the various categories of loans.

Shardul J Thacker

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