Now RE developers' letter of comfort from PFC, REC, IREDA at par with bank guarantee

To improve business environment for clean energy projects and attract investments, the government has decided to treat letter of comfort (undertaking) issued by state-run shadow banking firms PFC, REC and IREDA at par with bank guarantees.

Developers need bank guarantees for placing bids for clean energy projects offered by nodal agencies like Solar Energy Corporation of India (SECI) and state-run power giant NTPC.

Developers get bank guarantee on the basis of letter of comfort issued by financial institutions like Power Finance Corporation (PFC), REC and Indian Renewable Energy Development Agency Limited (IREDA).

Now treating letter of comfort issued by PFC, REC and IREDA would reduce procedural delay to seek bank guarantee for bidding for clean energy projects.

The move assumes significance in view of India's ambitious target of having 175 GW of renewable energy generation capacity by 2022. The Ministry of New & Renewable Energy (MNRE) has issued directions in this regard to PFC, REC and IREDA.

On new initiative Power and New & Renewable Energy Minister R K Singh told PTI, "The MNRE enhanced ease of doing business for RE investors and facilitates enhancement of increased liquidity in the market by allowing Performance Bank Guarantee with Letter of Comfort to be issued by the three Non Banking Financial Companies under Ministry of Power and Ministry of New and Renewable Energy namely PFC, REC and IREDA."
He further said, "The increased liquidity would promote investment in RE sector as additional liquidity will now be available to bid for new projects."
The minister has also ordered Solar Energy Corporation of India (SECI) and state-run power giant NTPC to pay safeguard and GST (good and services tax) pass through on annuity basis to further ease the financial stress being faced by RE investors."