The National Solar Energy Federation of India (NSEFI) sought IREDA’s interest rate to be at the same level as SECI’s proposed annuity rate of 10.41% for GST and Safeguard Duty compensation.
In a letter addressed to the Ministry of New and Renewable Energy (MNRE), the National Solar Federation of India (NSEFI) has asked SECI and IREDA’s policies on loan and interest rates for solar developers to be aligned together to prevent solar developers from incurring losses.
Instead of a lump sum one-time payment after two years, the Solar Energy Corporation of India (SECI) recently proposed a monthly annuity payment method spread over 13 years for claims made by solar developers under ‘Change in Law’ for Safeguard Duty and Goods and Services Tax (GST) compensation.
The federation noted in its letter that solar developers had approached various banks and financial institutions, including the Indian Renewable Energy Development Agency (IREDA), for approval of loans based on the securitization of GST and Safeguard Duty receivables.
However, the banks informed that the rate of interest on such loans would be a minimum of 11% per year. Moreover, only 85% of the amount would be funded.
Now, as the interest rate proposed by SECI is 10.41%, the loans approved at 11% by the banks would mean a loss for the solar developers, making it difficult to recover the amount.
Considering this issue, NSEFI requested the MNRE to direct IREDA to align its loan policy with SECI’s proposed annuity method. Notably, both SECI and IREDA fall under the aegis of the MNRE.
The letter further requested the Ministry to extend a 100% loan on the annuity payments from SECI and charge the same interest rate of 10.41% so that solar developers do not have to incur losses due to the difference between the interest rates.
Previously, the MNRE released a circular stating that GST and Safeguard Duty compensation to solar project developers should be paid within 60 days. Mentioning the orders already passed by the Central Electricity Regulatory Commission (CERC) on the ‘Change in Law’ compensation for GST and SGD, the Ministry added that there is now no need for the developers to approach the CERC for each case individually. Since most of the solar projects were already under development when the Safeguard Duty and GST were announced, they came under the clause Change in Law. Change in law comes into play when there is a new law or a change in the tax structure or when a new tax is introduced.