NEW DELHI (Reuters) – India hopes to receive one of the first loans issued by the China-led Asian Infrastructure Investment Bank (AIIB) later this year as it seeks to raise 500 million dollars for solar power projects from the newly established lender, Indian, officials said.
Funding for clean energy projects would allay fears from environmental lobbyists that the bank’s relaxed lending criteria could promote dirty fuels like coal in developing economies, like India, which are in a rush to increase production. energy production.
The multilateral investment bank, which has an authorized capital of $100 billion, plans to join global clean energy initiatives and may fund green investment projects to avoid promotion claims of pollution.
India, the bank’s second largest shareholder after China, is seeking to borrow from the AIIB, a senior official has said, to support Prime Minister Narendra Modi’s plan to expand installed solar capacity to 100 gigawatts by 2022 .
“In about six months, funds could start flowing from the AIIB,” Tarun Kapur, joint secretary at the Ministry of New and Renewable Energy, told Reuters.
Interest on the loan is expected to be 2-2.5% and would be linked to LIBOR – a floating benchmark based on the rate at which commercial banks lend to each other – for a term of more than 15 years.
The AIIB, headquartered in Beijing and launched in January, did not comment directly on India’s borrowing, but said it was developing a pipeline of projects in a number of countries.
“It is expected that the first loan decisions will be made later this year,” he said in written responses to questions submitted by Reuters.
India is in talks with the World Bank, Asian Development Bank, Germany’s KfW and the New Development Bank, set up by the major emerging economies that form the BRICS bloc, to raise more than $3 billion over the course of the fiscal year which begins on April 1.
India has requested $500 million in financing from the AfDB to support rooftop solar, and a similar sum to expand transmission networks to connect to solar parks. The AfDB has signed a cooperation agreement with the United States Agency for International Development (USAID) to support the expansion of solar energy.
India estimates it needs to invest up to $100 billion in solar power over the next 6-7 years to meet its ambitious goal of increasing its capacity by about 17 times from current levels of 5,800 megawatts.
“Funding is not an issue, but we need cheaper funds,” Kapur said. After covering costs of around 6-7%, the cost of funding from AIIB funds is just under 10%, compared to national rates of around 12%, he said. he declares.
Another finance ministry official who liaises with the AIIB, said initial discussions had taken place on clean energy projects and that more proposals could soon be submitted on other priority areas.
The AIIB is expected to lend between $10 billion and $15 billion a year for the first five to six years and could begin operations in the second quarter of 2016.
AIIB Chairman Jin Liqun said earlier this year that the bank has a good pipeline of co-financing and stand-alone projects.
($1 = 66.5910 Indian rupees)
Additional reporting by Rajesh Kumar Singh in New Delhi and Judy Hua in Beijing; Editing by Douglas Busvine and Simon Cameron-Moore