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First-loss protection mechanism is poised to mobilize rooftop segment

India has solar rooftop installed capacity of 4.3 GW that lags way behind government’s target to install 40 GW of rooftop solar by 2022. Regulatory hurdles, liquidity crunch, weak economic condition and reluctance of Banks & FI to lend to companies with below “A Grade” ratings has dwindled India’s rooftop solar market. OPEX model has gained advantage in the market in amidst of lacking creditworthiness of customers to put money in their project, where investor/lender pools in their money with expectancy of returns.

Due to lack of required grade of credit rating of by investors a huge potential in MSMEs lies untapped. 'First loss protection Program' is one of the instrument that would open up untapped MSMEs solar segment where this instrument would ensure that the amount of capital that has been invested in the case of a financial loss on security, including equity, debt, and derivatives instruments and would enable customers to opt for OPEX model even if they are below required “A Grade” rating . This instrument is poised to protect investors from a pre-defined amount of financial losses, thus enhancing creditworthiness, and financial profile of the investment.

Protection policy thus proposed would be a strong enabler to encourage the adoption of rooftop solar, creating a potentially large market thus reducing electricity costs and carbon footprint and increase cash flows. It will help to boost the rooftop sector and support to achieve Government’s target of 100 GW by 2022.