The government should announce a broad framework like real estate investment trusts for renewable industry
Since the government has an ambitious target of 175 gigawatt (GW) by 2022, and renewable energy being a capital intensive business, availability of long-term capital pool dedicated for the sector is important for its sustained growth. We urge that specific measures are adopted in the 2019 Budget for availability of long-term credit at favourable terms. This can be implemented with multiple options including earmarking funds for these projects in the banking system or have dedicated financial institutions/banks to provide lending to renewable industry and social infrastructure projects. Additionally, if the government along with the Reserve Bank of India can bring renewable energy projects under priority sector lending without any limit — currently solar rooftop projects are under priority sector lending category, however, it is restricted to Rs 15 crore per year — it would give a much-needed boost to the sector.
Attracting pool of capital from high networth individuals (HNIs)/retail investors is another opportunity which the government should explore for renewable energy and other social infrastructure projects. As an HNI/retail investor is unlikely to own and operate a solar business, the best way is to make such renewable energy projects an ‘Investment Product’ and not an asset to be owned, thereby allow pass through of tax incentives such as depreciation to make it tax efficient investment for HNI/Retail investors. There is an opportunity in this year’s Budget, for the government to announce a broad framework like real estate investment trusts for renewable industry since there is a need to introduce a secondary market for the industry to attract investments.
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