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Q&A Answers from SPDA

India has emerged as one of the most appealing markets for renewable energy, and in 2016 has announced a vast ambition to add an additional 175 GW of renewables by 2022. The plan includes around 100 GW of solar, which will include both utility scale projects, and distributed solar generation including rooftop installations, helping connect to up to 400-million people who currently lack access to electricity. Mitali Ghosh, Assistant Secretary General of India’s Solar Power Developers’ Association, discusses how the country is facilitating international investment in the solar energy market.


Q: What is the legal framework in place to entice investors to the Indian market, such as feed-in tariffs, tax credits and other incentives?

A: India is a power deficit country, and the Indian Government has set a target of 175 GW of operational renewable power in India. Every state is required to procure power from renewable energy – wind and solar – to meet their renewable purchase obligation (RPO).

The Indian Government has allowed 100% foreign direct investment (FDI) in infrastructure sectors, which includes power. Benefits under section 80 IA of the Income Tax Act, allowing tax exemption for 10 years, are available to infrastructure companies. To promote solar power generation, the importation of solar modules is duty free.


Q: What would be the process to obtain the permits, and how transparent would this process be to other applicants?

A: No special permit is required. A company is required to be formed as per the Indian Companies Act, which is quite simple.

To obtain a registration number for inward money, an intimation is required to be sent to the Reserve Bank of India (RBI), through an Indian bank acting as an authorised dealer. This also requires monthly reporting to the RBI, through the authorised dealer, on the end use of funds infused in India, which is again a simple format.

For dividends or payback to foreign investors, there are certain basic RBI guidelines on the repatriation of funds invested as FDI.

Dividend on equity shares or interest on convertible debentures is freely allowed without any restriction, subject to payment of applicable taxes (Dividend Distribution Tax).

Payback of the invested amount is allowed, provided the sale of security held by foreign investors is in accordance with prescribed guidelines and a Tax Clearance Certificate from the Income Tax Department is procured.


Q: For the draft terms of the power purchase agreements (PPAs) and grid connection contracts, how comparable are these to international standards?

A: The PPA terms are in line with international standards, however uniformity between all state PPAs is still to be worked out.


Q: Will the PPA have sovereign guarantees and will multilateral organisations such as the World Bank, IFC and MIGA support the projects?

A: Sovereign guarantees, either from the central or state governments, are not available. The ADB, World Bank, IFC, KFW and DEG are all supporting Indian projects, and they have invested in a number of Indian companies, providing equity as well as debt. Some of their investment included Welspun, Azure, Acme, and Mytra.


Q: Will local banks be able to provide debt financing, and if so what would be a typical debt to equity ratio or debt service coverage ratio (DSCR) and cost?

A: 50-million to 55-million / USD 749,907 to 824,898) and for wind is 5.75 to 6.5 crore rupees (Rs. 57.5-million to 65-million / USD 862,393 to 974,879), depending on location and machinery. The average DSCR required is 1.5 and the minimum is 1.25.





Co-located with

  • solar
  • eee
  • iws
  • ecowaste