German development bank, KfW has signed a loan agreement worth €200 million with the Rural Electrification Corporate Limited (REC).
Reportedly, REC will provide the funds to investors in the form of low-interest loans, to allow for investments in renewable energy production. Furthermore, the loans will be complemented by up to 30% counterpart contributions from the borrowers, and potential contributions from other banks.
The development bank anticipates that the private sector will leverage the loan with its investments to reach €285 million in total investments. In this vein, KfW also announced that REC will receive a grant of €1 million for the implementation of environmental and social management solutions, which are expected to improve standards in the Indian energy sector.
“India ranks third in the list of countries with the highest CO2 emissions. In light of the ongoing growth in the economy and population, demand for electricity will also continue to rise. KfW’s financing to promote the increased use of renewables will make an important contribution to slowing the rise in greenhouse gas emissions and reducing the deficit in the power supply,” says Professor Joachim Nagel, Member of the KfW Group Executive Board.
KfW signed the loan agreement on behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), which pursues its Indo-German solar partnership.
Meanwhile, the German and Indian governments signed the partnership in 2015 to increase the technical and financial support, with the aim of boosting India’s solar sector. The partnership agreement includes a provision regarding Germany’s willingness to disperse loans through KfW amounting to €1 billion until 2020.
India currently touts impressive solar PV plans of 100 GW. According to the government’s plans half of India’s generation capacity, 175 GW, will come from renewable energy resources by 2022. In 2017, India achieved 9.1 GW of annual additions in solar PV capacity, thus catapulting it to the ranks of the third biggest PV installer globally, that year.