Despite the additional overhangs of safeguard duty, GST and a depreciated currency, the first renewable auctions of 2019 have produced PPA tariffs that are almost on a par with the record lows seen in 2017 and 2018. Low renewable tariffs are not unique to India. This trend becomes irreversible wherever reverse auction replaces feed-in tariff as a method of price discovery. How will capital be raised under this new normal? Evaluating the experience of various classes of capital providers to the sector holds the key.
Given its history of extending credit to renewables, let’s consider the example of IREDA as a proxy for project lenders. The following figures are based on a 180-day NPA classification (versus 90 days for banks), but it is remarkable that IREDA’s `3,830cr solar loan book has zero gross NPAs (September 2017). Its Rs 5,226cr wind loan book is not far behind, with NPAs of only 1.3%. Barring projects exposed to habitually errant off-takers, evidence from other lenders is also promising.
