IREDA NCEF Refinance Scheme

The Indian Renewable Energy Development Agency (IREDA), along with the National Clean Energy Fund (NCEF), has launched a refinancing scheme. The scheme aims to boost biomass and small hydropower projects that were terminated due to unavoidable circumstances. Thus, the goal of this government scheme is to ensure clean and sustainable energy.

About the IREDA NCEF Refinance Scheme

Many renewable energy projects have been cancelled in the recent past because of policy matters like low tariffs. Other major natural factors, such as floods, droughts, etc., have also led to the termination of renewable energy projects. 

Due to these unavoidable circumstances, the feasibility of these projects and timely repayment of the loans have been affected. Given this situation, the IREDA NCEF refinance scheme provides funds for refinancing the loans.

The scheme refinances the loan components at nominal rates for these projects. For effective utilisation, this UP government loan scheme aims at providing support to only those projects that have a scope for revival.

The major objective of this scheme is to reinitiate biomass power and small hydropower projects. It aims to refinance the loan at concessional rates with funds provided by the National Clean Energy Fund. The Government of India established the NCEF to encourage sustainable growth that is also ecological.

Structure of the IREDA NCEF Refinance Scheme

• The scheme covers power generation projects that deal with:

  1. Small hydropower up to 25 MW

  2. Biomass combustion up to 100 MW

• NCEF will provide the loans to IREDA. 

• IREDA will pass these loans to scheduled banks so they can provide loans to the eligible projects.

• Refinancing, not more than 30 per cent, shall be made available for the above-mentioned projects at a nominal rate of interest.

• The rate of interest shall be 2 percent per annum.

Duration of the IREDA NCEF Refinance Scheme

• The period of repayment of the amount that has been refinanced should be in coordination with the period of repayment of the commercial banks and financial institutions.

• The repayment period cannot be more than 10 years. Those who avail of this loan will get a grace period of six months from the date on which the funds are released.

• The due date of quarterly instalments shall be the last day of each calendar quarter.

• The date of repayment is the date on which the amount is sent to IREDA’s account. If repayment is made before the due date, the credit will be given only on the due date.

IREDA NCEF Refinance Scheme Eligibility Criteria for Banks

Banks and financial institutions must meet the following requirements to be eligible for the IREDA NCEF Refinance Scheme: 

• They should have made profits in the preceding three years. To qualify for this government scheme, banks must not generate any losses.

• Gross non-performing assets should not go over 5 per cent for the entire portfolio of the bank. This condition does not apply to State/Central PSU Banks and government NBFCs.

• The bank’s capital adequacy ratio (CAR) should be in line with regulatory norms.

Other Eligibility Conditions

• The renewable energy units should have a minimum of two years of operational activity after reviving the project.

• For more than two years, the plant load factor (PLF) should be 20 per cent for biomass power and 15 per cent for small hydropower.

• Load sanctions against reservations for future cash flows are not eligible for this scheme.

• The project shall be revived within six months of the loan claim.

• The granted amount shall be recalled by IREDA in case the project does not meet the criteria. The IREDA might ask for repayment of the loan in a single term.

• The commercial banks and financial institutions can appeal for additional time up to one year for the revival of the project by stating appropriate reasons to IREDA.

Ineligible Renewable Energy Projects for the IREDA NCEF Refinance Scheme

• Borrowers who have been declared defaulters or non-cooperative by the Reserve Bank of India.

• Projects that have been dormant or inactive for five years.

• Companies that have net profit according to the latest audited balance sheet.

• Projects that have availed a one-time settlement.

Conclusion

IREDA NCEF Refinance Scheme is a government loan scheme where the IREDA provides refinance loans to select commercial banks and financial institutions that finance biomass power and small hydropower projects from NCEF funds. It helps in reviving the projects that had been called off due to unavoidable circumstances.

Only select banks and financial institutions are eligible under the IREDA to offer this UP government scheme. The loan amount, the presence, and the scope of refinancing shall be solely decided by the IREDA.