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Tax Free Green Bonds May Help Solar Power Tariff to Achieve Grid Parity

News

State-owned firms, including Power Finance Corp. Ltd (PFC),Rural Electrification Corp.Ltd (REC) and Indian Renewable Energy Development Agency Ltd (Ireda) will raise Rs.5,000 crore by selling tax-free bonds to raise low-cost and long-term funds to help finance India’s plan to quadruple its renewable energy production.

Source: live mint

SNP Insight

 Tax free bonds will enable these companies to provide long term financing for solar projects with a low interest rate (10.5%). This may reduce the cost of debt for the solar project developer and may be result in to lower tariff for consumers. This may also help the upcoming solar projects to achieve grid parity on the base of tariff. Easy and low cost financing may add force to the solar capacity addition momentum to achieve 1GW solar capacity addition by 2022.

Source: SNP Infra Research