The Twenty First report of the Parliamentary Standing Committee on Energy (2021-22) titled ‘FINANCIAL CONSTRAINTS IN RENEWABLE ENERGY SECTOR’ that was presented to Lok Sabha on February 03, 2022 Laid in Rajya Sabha on February 03, 2022 is a deeply disappointing report from all angles. The list of ten observations and recommendations raise serious concerns from a social, economic, environmental and energy perspective.
The recommendations plunge when linked with the ‘Panchamrit” or the five commitments made by the Hon. Prime Minister Mr. Narendra Modi at the global conference in Glasgow in November 2021. These commitments included to raise the non-fossil fuel based energy capacity of the country to 500 GW by 2030, by 2030, 50% of the country’s energy requirements would be met using renewable energy sources, the country will reduce the total projected carbon emission by one billion tonnes between now and the year 2030, the carbon intensity of the economy would be reduced to less than 45% by 2030 and the country would become carbon neutral and achieve net zero emissions by the year 2070.
A Poor Report
First of all, it is truly shocking to note that the composition of the committee is all male! And the report comes across as a shoddy piece of work as it lacks a determined set of questions that would help provide a clear picture of the renewable energy landscape. The committee has failed to do a basic research and documentation to understand and map the many components, players and participants of the renewable energy sector particularly in the context of the climate commitments. While India’s climate commitments received global accolades, this report is an embarrassment as nothing really ties with the huge commitments. In a fuzzily comprehended effort, the result too obviously will be obscure and this is exactly what the report displays. Any such standing committee report has a list of elements such as ‘Executive Summary’, ‘Objective of the Committee’ ‘Methodology’, Key Findings’, ‘Charts’, Graphs’. ‘References’ etc. This report stops short of some of the basic tenets of report writing, is poorly executed and the language too is very condescending.
Role of Standing Committees
Standing committees are constituted from time to time every year and they work on a continuous basis. Their primary function is to help law making by consultations and research on every aspect of the said subject for which they are constituted. Although the reports are not binding, they play a huge role as an advice-giving body and have the power to persuade. The essence of the committee is to scrutinize the current events with all the expertise of the members irrespective of their politics. However, it appears that a committee such as this that has the capacity to influence good decision making at various levels and shape policy has taken it up in a very trivial, hasty and careless manner.
Lacks Genuine and Wide-ranging Consultations
The committee’s recommendations have a major limitation as it has not had any consultations other than with the representatives of the MNRE, IREDA, PFC and REC. As a parliamentary standing committee, it surely could have held open and extended consultations with academia, civil society, SERCs, state governments, financial institutions, regulators and the local communities where renewable energy has been installed on a large scale in the country such as REWA, Badla, Pavagada etc. The committee has failed to ensure this basic need of having consultations at various levels from diverse sections of the society and from across the country in making these recommendations that decides such a crucial topic of energy security and future of the country. The fact that the consultations were limited to just MNRE, IREDA, PFC and REC the recommendations certainly lean downright in favour of the RE industries.
Stresses merely on Financial difficulty
The entire report focusses primarily on the fact that India is experiencing transition and that there is a huge gap between the required and actual investment, so to address this gap, it justifies that ensuring financial security for the renewable energy sector will help achieve the said targets. Many news reports and studies that are emerging are beginning to show that finances are not the major challenges of the renewable energy sector. The sector is faced with serious environmental consequences, social impacts on local lives and livelihoods, ecological degradation and human rights violations. There are many areas that warrant the urgent attention of parliamentarians and this opportunity to address this need through this report has been lost.
Ignores Major Environmental Concerns
First of all, the removal of renewable energy installations such as Solar parks from the purview of environmental clearances by the Ministry of Environment and Forest and Climate Change needs an urgent review. This particularly even after an NGT order of 2014 that asked the MoEF&CC to revisit the decision. But MoEF&CC has repeatedly stuck to the view that Solar parks cause little environmental problems and hence have been removed from the processes of environmental clearances. Stories from across the country have called out illegal land grab, lack of procedure in land acquisition and also the impacts of utility scale solar parks on the lives and livelihoods of local agro-pastoral communities. Many regions of the country are also witnessing conflicts with RE projects and transmission lines as they are proposing to destroy the last remaining habitats of some of the threatened and endangered species. A thorough and urgent review of these issues should have been considered, particularly post the Covid-19 pandemic crisis that has left several without land and livelihood. It is appalling that none of this has been considered by the committee.
With finance as a major concern throughout the report, the committee recommends that the ministry should proactively work to make available innovative financing mechanisms and alternative funding avenues like IDF, InVITs, Green/Masala bonds, crowd funding etc. Such a recommendation fails to capture the ground realities of the country and fails to understand that every country, state, region may need a unique approach and a one size fits all may not be the ideal way to go. The report nose-dives on how it even arrived at providing these recommendations. There is no mention of any best practice studies of financing from across the world or lessons learnt from other sectors from where these recommendations were even arrived at.
It also recommends the possible prescription of Renewable Finance Obligation on the lines of Renewable Energy Purchase Obligation for banks and other financial institutions. There is enough literature available today on financing models given the uncertainty of the Renewable energy sector. But yet with little reference the committee makes confident recommendations to a wide variety of financing models including the setting up of Green banks. The implications of such innovative financing models may have deep repercussions given that the country is still recovering from the impacts of demonetization, GST, Covid-19 pandemic and is yet to stabilize in many ways, particularly in the finance sector. The focus of the report very surely is the industry and its profits with least concern to ensure a balance of interests across the various players and participants in the Renewable energy landscape.
Special Window Mantra
It then recommends that IREDA should be given special window for borrowing from RBI at repo rate in line with other specialized financial Institutions to ensure availability of low-cost financial resources for the renewable energy sector. Special and single window clearances, one stop shops and more to help the industry has become the mantra to invite investments in all sectors. Such special window provisions only dilute the legal provisions that otherwise aim to ensure robust, reliable, sustainable, ethical and beneficial projects from coming up. Such one stop shops will only help benefit the speculative investments and the multinational corporations and venture capital industries to thrive with absolutely no concern to the local needs of the country and its people.
The committee recommends that the ministry should explore the possibility of exempting PFC Limited, REC Limited and IREDA from payment of Guarantee fee for raising funds from international agencies like KfW, JICA,ADB etc or alternatively guarantee fee be charged at a concessional rate on the lines of the National Bank for Financing Infrastructure and Development. This is another major area of grave concern. Such a recommendation will leave the investors and developers scot free when disaster strikes and will also increase the risk of numerous incidents of filing for liquidation.
Non Performing Assets
On the topic of renewable energy projects being declared as NPAs due to the non-perennial nature of the energy generation, the committee feels that this aspect has not been considered while drafting policies for the Renewable energy sector financing and therefore recommends that the Ministry take up this issue with the Ministry of Finance and Reserve bank of India for necessary relaxations in the concerned regulations and guidelines. It further recommends that the Ministry should pursue all the banks which provide loans to the Renewable energy sector to keep EMI higher in the peak season and low in the off season of the revenue generation. Here too the focus is on the industry to who it may be a good move but unfortunately overlooks the ground realities of the local communities who bear the brunt of loss of livelihoods, lack of food at the household level, and having to deal with extreme weather conditions that leaves them with poor health and nothing to rely on. It is time for critical evaluation of the various projects and shape policies accordingly to ensure a good socio-economic-energy balance. Renewable energy projects must be made to co-exist with local agroecological and pastoral livelihoods. Decentralized decision making on such projects is the need of the hour and also such projects must be under the local governments to help strike a balance during the seasons for various kinds of livelihoods to co-exist-survive and sustain themselves.
Tariffs and PPAs
In the context of tariffs, the committee also recommends that the Ministry should actively engage with the state governments to avoid any unilateral cancellation /renegotiation of PPAs as it causes uncertainty and negatively affects the investment in the renewable energy sector. Given that the PPAs have caused so much distress for developers and discoms across many states, the committee has failed to understand the challenges in an in-depth manner. A detailed study of the current crisis situation and a consultation across the country would have helped understand the problem better for an appropriate recommendation.
To ensure speedy approvals by SERCs, the committee makes sweeping recommendations that a maximum period should be prescribed for according approvals/disposing off petitions by appropriate amendments in the Electricity Act. Instead of such a hasty approach, the committee could have held consultations with SERCs to understand the nature of the problems in detail and even followed up on the many ongoing approval procedures to correctly evaluate the situation. It also recommends that a maximum stipulated time should be prescribed for appointment of members of the SERCs when vacancies arise to ensure speedy approvals. Such recommendations will only result in poor decisions and appointing of members not competitive enough to weigh every application from a multidisciplinary approach that comes for approval from a socio-economic-environmental- energy equity standpoint.
Delayed Payments and Discoms
With respect to delayed payments by Discoms, the committee recommends that the rules of the Electricity (Late payment Surcharge) rules 2021 are properly implemented, to ensure developers get compensation or late payments and it also recommends that the PPA signed has the provision of payment security instrument which is implemented in letter and spirit. It also recommends that the Ministry should pursue the States/Discoms to clear dues on time. This recommendation completely fails to look at the problem from a multidimensional approach and is completely in favour of the industry. It fails to see the challenges faced by local governments, local institutions, local communities and others who suffer at the hands of the Renewable energy developers who land up mucking up the land destroying watersheds, local geographies, ecologies, and Socio-cultural landscapes and more. Many developers have even failed to comply with the basic rules and regulations and have not addressed any local problems either proactively or through their CSR mechanisms and get away grabbing as much as possible from many a land.
The committee further recommends that the Ministry should come out with lucid and enforceable guidelines for compensation with respect to curtailment for reasons other than the grid security. This was particularly after the losses suffered by the renewable energy projects due to the ‘Must -Run’ status that remained unchanged during the Covid related lockdowns. The laws of the country have been diluted enough and more to allow all kinds of investments and projects and more so in the renewable energy sector. This recommendation of coming out with more lucid and enforceable guidelines is a shame on the committee for failing to see and address the ground truths of the renewable energy landscape across the country.
Roof Top and KUSUM
With respect to the implementation of schemes such as Roof top and KUSUM for small consumers, the committee recommends that the Ministry pursue the local banks to ensure availability of funds for installation of renewable power. It is further disappointing that the committee fails to recommend the KUSUM and Roof top as a ‘Must run’ project or make it mandatory as it is probably more feasible in urban areas and in rural areas to ensure energy access to all. It could have thought further and made recommendations from a gender equity perspective to ensure no woman is left behind or no household is left behind and also made recommendations to provide financial support to women to take up such projects that would also help increase their economic productivity and well-being.
Limit of Loans
Lastly, in the context of RBI having recognized the renewable energy sector under priority sector lending for loans up to a limit of Rs.30 crores and many banks not being conversant with Renewable energy sector, thereby not offering the existing small financing support, the committee recommends that the limit of loans for the renewable energy sector under priority sector lending should be increased and recommends that the Ministry pursues this matter with the RBI. It also recommends that banks should be sensitized about renewable energy so that this sector is not overlooked in their priority sector lending. The prime focus obviously is the industry and the committee has gone overboard to ensure the industry benefits in every possible way, does not suffer losses, makes as much as profit, does not have to negotiate very hard with any player and can enjoy the plug and play model to its utmost possibility.
Failure to Comprehend Recent Advances
The committee has failed to take into consideration the other challenges such as the more recent drives in the manufacture of solar photovoltaic panels or the lack of a solar waste handling and recycling policy. It also disheartens to note that the report has no mention of energy storage systems or their after-life challenges. Lithium ion batteries have serious environmental implications and their recycling and disposal methods can be expensive and cumbersome. If a standing committee report fails to address such crucial concerns of the sector, it is evident that a host of new challenges of contamination and public health issues will emerge soon.
Skewed title and devious recommendations
Assisting informed debates in the parliament is a key role played by the standing committees as they have representation and involvement of members from different political parties and also from both houses of parliament. A well designed and researched parliamentary standing committee report is a store- house of knowledge for decision makers, researchers, lawyers, academicians, journalists and the public in shaping good decisions for the country. This 21st report of the Parliamentary standing committee on Energy is an unacceptable report. The title of the report “Financial constraints in the Renewable energy Sector” itself is a very skewed title that talks in favour of the industry and does little to ensure a balanced understanding of the landscape and contributes least to good decision making in the energy sector of the country in transition.
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