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Pankaj Tyagi
| Updated: 05 May, 2022 | Category: Latest News

IREDA NCEF Refinance Scheme (Revised Version)

IREDA NCEF Refinance Scheme

The scheme envisages reviving the operation of the current projects dealing with the Biomass Power & Small Hydro Power by reducing the funding cost via refinance at the concessional interest rate, with funds secured from NBEF, i.e. National Clean Energy Fund.

Scope of the IREDA NCEF Refinance Scheme

Technology: Small Hydro Power (SHP) & Bio-mass combustion-based grid-connected power generation projects.

 Financing Structure under the IREDA NCEF Refinance Scheme

  • Under the Scheme, IREDA would facilitate funding coming from NCEF via refinance to scheduled commercial banks and other allied avenues, including IREDA, w.r.t their lending to the aforesaid category of Renewable Energy projects.
  • Refinance not surpassing 30 per cent of the outstanding loans (including FITL, if any) of aforesaid projects’ category in the books of scheduled commercial banks/financial avenues (including IREDA) would be made accessible to them at a reduced interest rate by the IREDA. But, the maximum refinance amount has been capped at Rs. 15 Crs per project.

 Rate of Interest

The interest rate on the refinance shall be 2 per cent/annum. The scheduled commercial Banks/FIs are liable to facilitate the refinanced component of the loan at the interest rate of two per cent per annum

Repayment timeline

Tenure of refinance repayment timeline for the refinance sum should be co-terminus with the repayment timeline of bank/FIs for that project & the max. repayment timeline shall be ten years apart from 6 m moratorium from the date of release of refinance amount.

Institutions eligible for IREDA NCEF Refinance Scheme

Scheduled commercial banks and financial avenues would stand eligible for the refinance scheme. IREDA would handle the entire affairs of this scheme and has the sole authority to pinpoint the availability and refinance’s the extent

The scheduled commercial banks /FIs shall be required to meet the given parameters to qualify for the refinance scheme:

  1. The SB/FIs should not accrue losses during the last three years.
  2. Gross NPAs should be lower than or equal to 5% of the entire portfolio of the lending agency. The condition shall not apply to State/ Central PSU Banks/Govt. NBFC’s/ Govt. FIs.
  3. The capital adequate ratio should be in line with the underlying regulatory norms.

Other eligibility conditions:

  1. Operational grid-connected power generation projects:
  2. Combustion oriented Biomass power projects (Upto installed capacity of 10 Mega Watts)*
  3. All Small Hydro Power Projects (upto installed capacity of 25 Megawatts)**

* In the case of combustion oriented Biomass Power, the projects of more than 10 Mega Watt may also be taken into account, but the refinance sum will be limited to the threshold as per pro-rata basis upto 10 Mega Watt only, subject to maximum refinance sum that can be secured as per the scheme, i.e. Rs. 15 Crores.

** Subject to max. refinance sum that can be secure as per the scheme, i.e. fifteen crores rupees.

  • Projects viability hindered, on account of tariff, fuel cost issues and Force majeure conditions
  • The project should be examined/functionalized post utilization of the NCEF refinance loan.
  • Plants must be functional for at least two years post-project commissioning, and the two year’s average PLF (in the event of operated functioning for more than two years, the average PLF of any two years) should be a minimum of 20 per cent of Biomass Power and 15 per cent in case of small hydropower (SHP) projects.
  • Refinance does not surpass 30 per cent of the loan outstanding at the rate of two per cent interest rate from IREDA to schedule CBs/FIs, and the same shall be extended by the banks/FIs to the project developers at the identical rate of two per cent subject to, max. Refinance sum Rs 15 crores/project.
  • The project must have a minimum of average DSCR of 1.1 posts considering the IREDA refinance amount and should be able to service the loan.
  • The project should be functionalized/ revived within six months from the disbursement’s date; in case Bank / FI does not facilitate the confirmation of the plant’s revival within six months, the refinance granted may be recalled, and the sum must be refunded to issuance authority in one go. But, in some cases, an additional timeline of up to one year, apart from above six months, might be given for functionalization/revival of projects, subject to sharing of viable reasons/justifications by banks/FIs to the IREDA’s satisfaction[1] .

List of non-eligible entities/projects for IREDA NCEF Refinance Scheme

The given categories of entities/promoters/projects shall stand ineligible for the refinance scheme.

a) Declared wilful defaulters, in accordance with the RBI regulations

b) Declared Non – cooperative borrowers, in accordance with the RBI regulations

c) Projects remained non-functionalized for the last five years.

d) Company with a net profit in view of the latest Audited Balance sheet/ Annual Report shall stand ineligible, [Companies with Net Loss fit to the scheme despite having the Cash Profits at the disposal]

e) Projects/Loans which secured OTS, i.e. One Time Settlement, would stand ineligible

Step by Step Process of Registering under the IREDA NCEF Refinance Scheme

Sanction of refinance

A scheduled commercial bank / FIs willing to access the refinance scheme shall file their loan request with IREDA after fulfilling the underlying requirements

IREDA shall issue a notification cum letter confirming the refinance’s sanction after inspection and authorization of the refinancing proposal.

Legal documentation

The SCBs/FIs intending to secure refinance scheme should provide the following documentation;

  1. A resolution copy validated by the BODs or any other competent committee or specific authorization from the qualified authority to secure refinance from IREDA and to execute documentation in favour of IREDA.
  2. Concerned officials’ signature
  3. The SCBs/FIs shall execute an agreement for securing refinance and such other documentation as may be required.

Application for disbursal

Following the approval and arrangement of the legal documents, including the security for refinance, the SCB/FI may apply for the release of refinance w.r.t eligible outstanding loans post-commencement/revival of the project. The application shall furnish particular relating to the eligible loans disbursed and the outstanding amount by the SCB/FI w.r.t which refinance is being sought from IREDA.

Conclusion

Biomass Power & Small Hydro Power Projects often have trouble preserving their existence due to fiscal issues. IREDA NCEF Refinance Scheme resolves this critical issue by providing necessary financial aid to such projects in India.

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Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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