In order to promote infrastructure development, the government has started to lower sovereign guarantee fee. Among the first beneficiary is the Rewa ultra mega solar park and the next in line is likely to be smart cities.
Rewa Ultra Mega Solar Ltd (RUMS) will get a World Bank loan of $98 million, for which the sovereign guarantee fee will be a concessional 0.5 per cent, and the loan will be channelled through the Indian Renewable Energy Development Agency (IREDA).
Senior officials told Business Standard that Indian Infrastructure Finance Corporation Ltd (IIFCL) was likely to be the second beneficiary of a $1-billion loan, which is being negotiated with the World Bank and the Asian Development Bank.
The IIFCL loan will be for public-private partnerships under the Central government’s smart city projects.
The 70-basis point concession in the sovereign guarantee fee helped IREDA to extend the loan to RUMS at 8.5 per cent, said K S Popli, chairman and managing director, IREDA.
The Central government charges 1.2 per cent for extending sovereign guarantees to loans. The fee was earlier 0.2 per cent but was hiked last year.
Besides the loan, RUMS is getting a $2-million grant from the World Bank.
IREDA and RUMS signed the loan agreement for financing the common infrastructure of two solar parks in Rewa and Mandsaur. The infrastructure includes transmission lines.
“If the sovereign guarantee fee is not charged at a concessional rate, the interest rate goes upwards of 9.5 per cent for smart city loans. While the government can charge higher fees for sectors that have developed, they should be reduced for those that are developing,” said an official involved in the negotiations.
“We will be looking at giving a concessional rate on a case-to-case basis,” said a finance ministry official. The discounted rate will, however, be higher than the 0.2 per cent charged earlier.
Under the shared infrastructure for the solar parks programme, IREDA will provide loans to select states to invest in solar parks, mostly under the Ministry of New and Renewable Energy’s (MNRE’s) solar park scheme.
The two solar parks, with targeted installed capacities of 750 MW in Rewa and 250 MW in Mandsaur, are the first ones to get the loan. In addition, other states where potential solar parks could be supported under this project are Odisha, Chhattisgarh, and Haryana.
“The Rewa project has become a remarkable model for large-scale solar projects in the world to follow,” said Simon Stolp, lead energy specialist, World Bank, South Asia, adding that the institution would extend loans to other shared infrastructure projects in the solar sector.
RUMS will utilise the money under this project to develop the common infrastructure such as power pooling substations and intra-park transmission infrastructure, and provide access to roads, water supply, and drainage, among other things.
While some states intend to provide a full range of infrastructure services to select private- or public-sector developers, others plan to provide only pooling stations to facilitate internal evacuation. This, in turn, is expected to facilitate solar power investment by select developers in support of the Central government’s renewable energy efforts, said a RUMS press note.
The Rewa project got a winning bid of a first-year tariff of Rs 2.97, while the then prevailing solar tariff even with viability gap funding was Rs 4.50. Actis-backed Spring Energy, Mahindra Renewables, and Acme are setting up a 250 MW unit each in Rewa.