Credit Guarantee For Affordable DRE Equipment Soon: R.K. Singh
Union Minister for New & Renewable Energy R.K. Singh on Friday said that the government is working towards a new credit guarantee scheme for distributed applications of renewable energy (RE).
"There is already a lot of work happening on the ground, and our scheme could benefit lakhs of families across the country," Singh said at the 'National Summit on Powering Sustainable Livelihoods' organised by the Council on Energy, Environment and Water (CEEW) and Villgro Innovations Foundation's Powering Livelihoods initiative
Singh added that the government plans to make distributed renewable energy (DRE) livelihood equipment affordable.
"One aspect of this will be tying up with banks. If a family wants to own a solar dryer, they should be able to get financing from the banks, and we will work towards that. Manufacturers and users of DRE for livelihoods are pioneers, and now the government will scale it up to the next level," he said.
Singh released two new reports by CEEW and Villgro, which reveal that clean technologies have the potential to impact 37 million livelihoods in India's agriculture and textile sectors and translate into a market opportunity worth almost Rs 4 lakh crore (about USD 50 billion).
Further, 70 per cent of women and farmers using clean technology reported an income increase, typically by 35 per cent. They use clean-energy powered products such as solar-powered silk reeling machines, multi-food processors, micro solar pumps, solar vertical fodder grow units, among others, to enhance and diversify their income.
Loan Guarantee V/s Subsidies
On the sidelines of the event, Ananth Aravamundan, Sector Lead, Climate Action, Villgro, told Businessworld about the demand for credit guarantee schemes over subsidies.
"Subsidies are a short-term mandate fix. They might encourage people to buy, but then when the subsidy is removed, the market crushes. We have seen this time and again in the renewable energy sector. So, what happens is that you are not strengthening the market but rather temporarily boosting it. A loan guarantee has a much longer term, and it helps to build the intrinsic strength of the market by allowing farmers to take loans at a reasonable rate of interest and by avoiding any major collateral requirements. This is the best way to encourage any product," he said.
"We have seen that with guaranteed financing, the cycle gets done. When the farmer takes the loan, it's a good product that they are able to utilise to increase their income level and payback the loan. This way, automatically, the business model of the products gets built, and even from the manufacturer's side, they understand what they need to include in the products to meet the needs of the farmer," he adds.
On India's growth trajectory for distributed applications of renewable energy Singh said, "We will, however, need large-scale manufacturing and standardisation of distributed applications of RE to lower prices and expand the sector. We have seen the potential of grid-scale solar power; India will scale up distributed applications of renewable energy for livelihoods. Just like we have a large programme on rooftop solar and solar irrigation, we will create a large programme for DRE livelihoods,"
"A very simple solution to the price reduction is an increase in volume. In an assembly model, scalability reduces the cost of component procurement, manufacturing costs, and overhead," Aravamundan told.
In India, solar-powered pumps: higher capacity and micro-pumps, have the maximum deployment potential, followed by solar-powered vertical fodder growing units and solar dryers. Collectively, these four technologies alone can impact around 27 million livelihoods. Unsurprisingly, solar pumps are the most mature among these technologies due to the government programmes supporting them since 2015.
Abhishek Jain, Fellow and Director, Powering Livelihoods, CEEW, said, "India is among the global leaders in clean energy transition. With a programme like Powering Livelihoods, we are taking this clean energy transition to the masses and contributing to their incomes and livelihoods. By deploying more than 11,000 such technologies across India since the pandemic, we have shown the impact of clean-energy-powered livelihood technologies on enhancing and diversifying people’s incomes. In a country where a million youth reach the working-age population every month, we need to aggressively support jobs and livelihoods."
States With Great Potential
The reports found that clean-tech-powered technologies have the greatest impact opportunity in Uttar Pradesh, followed by West Bengal, Bihar, Gujarat, Maharashtra, Madhya Pradesh, and Karnataka. But the relative market for each livelihood technology varies across states. For example, micro solar pumps have the highest market share in West Bengal, whereas solar dryers have the highest market share in Maharashtra.
Further, the analysis highlighted that women form the majority of these clean tech users currently. Out of the 767 users surveyed across 19 states, 74 per cent of respondents were women. The clean technologies deployed had several social impacts as well.
On this, Aravamundan delineated, "Through Powering Livelihoods, we have supported social entrepreneurs who are trying to create lakhs of livelihoods in rural India by harnessing renewable energy, using scalable and replicable business models. Over a 15-year investment horizon, the clean tech product variants become more attractive than their grid alternatives. We hope that the evidence generated by this programme will motivate policymakers, financiers, and manufacturers to extend support to mainstream such livelihood products."
Experts state that the use of technologies is often constrained by raw material unavailability, limited earnings due to poor market linkages, and a lack of service support in rural areas. A concerted effort is required by stakeholders to commercialise these technologies through enhanced capital support for manufacturers and affordable credit for end-users.
When asked about the required impetus from the government, Aravamundan said, "The government is an important customer, and you have to learn how to do business with the government. Private and small companies find it difficult to do business with the government. The main problem with government is that the payment cycles are very long, so you have to have a way of running your business for six months until the money comes from the government. So that's what we tell our students: if you are working with the government, you better know how to manage your working capital. Another problem is that when venture capitalists sees that there is heavy dependency upon the government, they tend to back off."
Furthermore, Aravamundan emphasised that from the government's side, the ease of doing business has to improve. "Steps like the GeM portal, where common user goods and services can be procured, are picking up, but for this sector, particularly, the GeM portal is not very effective," he added.
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