Asserting that the current cost of financing solar projects in India is extremely high, veteran banker Uday Kotak on Tuesday advocated setting up a development financial institution to fund renewable energy projects which have a long gestation period.
The CII president and Kotak Mahindra Bank managing director also said India needs to increase production of solar panels and reduce its dependence on imports from China in its pursuit to become self-reliant.
Currently, India imports 80-90 per cent of solar panels from China.
Pointing out that an average clean energy project takes about 15 to 20 years to break even, Kotak said it is not possible to depend on bank financing alone.
“We therefore need to really create a format of what I call as development finance, and it is something which I would recommend strongly both along with global institutions and, including development global finance institutions, as well as the Indian government, to strengthen the concept of development financial institutions within India,” he said.
It is time to build an infrastructure financing institution with strength, particularly in the area of renewable energy and solar energy, he said while addressing the virtual World Solar Technology Summit.
“We need to be able to put equity and be able to price the cost of debt significantly lower than where it is. Today the cost of debt is in the range of 8-11 per cent, and most countries including China have financing at sub-5 per cent.
“So there’s a huge gap on financing costs of this facility in India, which is again going to affect the speed at which we create cell capacity,” he said.
He also said policymakers should include solar industry under priority sector financing so that it gets a boost.