India plans to set up a US$350 million fund to finance solar projects, Indian Power Minister R.K. Singh said, as the nation steps up efforts to achieve its ambitious target of adding 175 gigawatts (GW) in renewable energy by 2022.
India will need at least US$125 billion to fund a plan to increase the share of renewable power supply in the country’s grid by 2022, underlining the immense financing challenge ahead.
The country, which receives twice as much sunshine as European nations, wants to make solar central to its renewable expansion. It expects renewable energy to make up 40 percent of installed power capacity by 2030, compared with 18.2 percent at the end of last year.
“The country would achieve its target of 175GW of installed renewable energy capacity well before 2020,” Singh said at an event organized by the International Solar Alliance (ISA) in Abu Dhabi on Wednesday.
Installed renewable power capacity is currently at about 60GW and India plans to complete the bidding process by the end of next year or 2020 to add a further 115GW of installed renewable energy capacity by 2022.
India-based Yes Bank Ltd has committed to financing solar projects worth US$5 billion, while state-run NTPC Ltd is to contribute US$1 million to an ISA fund, the power ministry said in a statement.
India wants foreign capital to account for a bulk of its investments to meet its renewable energy target.
However, industry experts say most of the financing for the nation’s renewables drive so far has come from domestic banks and such banks have to account for the lion’s share of new renewable investments in the future.
Separately, India is considering a proposal to allow foreign investors to own larger stakes in the nation’s banks, the Business Standard newspaper reported, citing a government official it did not identify.
Indian Prime Minister Narendra Modi’s administration is holding talks to raise the foreign investment limit from 74 percent to 100 percent in private-sector banks and from 20 percent to 49 percent in state-run banks, the report said.
Foreign investment includes foreign direct investment and overseas portfolio investment through various routes. A higher cap would make it easier for banks to meet capital requirements under global Basel regulatory standards.
However, the report cited the unnamed official as saying that the banking regulator might have some objections to the move, and Indian Secretary of the Department of Financial Services Rajiv Kumar did not reply to the newspaper’s request for comment.
Additional reporting by Bloomberg
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