June 19, 2018 – A new analysis of energy project lending shows that majority of government owned banks and financial institutions continued to fund coal projects in 2017. The same analysis also reveals private financial companies are comparatively investing more in renewable energy (RE) projects compared to coal. The report finds that coal received ₹60,767 crores (US$9.35 billion) in lending whereas RE received ₹22,913 crores (US$3.50 billion).

Joe Athialy, Executive Director of CFA, said “It seems like the government and public financial institutions are living in a bubble devoid of market forces. The shift against coal and towards solar and wind is quite well established in the financial markets now and investing in coal has and will expose public banks to further bad loans.”

This report identified and reviewed project finance lending to 72 energy projects, comprising coal-fired power stations and renewable energy generation facilities in India that reached financial close in 2017. These projects attracted total lending of ₹83,680 crores (US$12.85 billion) .

Of the top 10 lenders to coal power projects, 8 were majority government owned banks that collectively gave close to ₹30,337 crores (USD 4.5 billion) in new and refinanced lending towards 12 coal power projects. These were Rural Electrification Corporation, SBI, IIFC, Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank, and Power Finance Corporation.

Over 70% of lending for coal was refinancing of existing debt for projects that have already been built or are under construction. SBI, among other public banks, financed ₹11,360 crores ($1,755 million) towards coal power projects whereas for RE, it financed ₹2,162 crores ($323 million). In the financial year 2017, SBI wrote-off bad loans close to ₹20,339 crores ($3,019 million). The highest among all public sector banks .

In contrast to coal lending, half of the top 10 lenders to 60 renewable power projects (solar and wind) were commercial financial institutions such as L&T Finance Holdings, Yes Bank, IndusInd Bank, IDFC, PFS, as opposed to majority government-owned banks. 76% of RE project finance was primary finance and 24% was refinancing of existing project indicating a vast growth in new RE projects in 2017.

All the lending identified was concentrated in 14 states. Of these, only two attracted no renewables lending; Jharkhand and Uttar Pradesh. States with significant renewables lending such as Karnataka, Punjab, Tamil Nadu and Telangana had no coal lending. Projects in Uttarkhand and Odisha received minimal lending overall, with no loans to coal-fired power projects and little to renewables.

In states such as Gujarat, renewables lending outpaced coal lending more than four-fold. In most other states with both coal lending and renewable energy lending, coal lending was higher than renewable lending. Chhattisgarh provides an extreme example, where coal-fired power projects attracted almost 10 times that of renewables projects in 2017.

The earlier CFA study, ‘Coal Currency’, mapped lenders of 125 projects, with a total capacity of 243 GW. Out of a total available data of ₹4,82,648 cr, ₹51,026 cr or 11% were financed by 22 international financial institutions, while the 89% or ₹4,31,622 cr. was financed by 51 national financial institutions – which include non-banking institutions, public and private commercial banks.

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For more information, contact

Joe Athialy, Executive Director, Center for Financial Accountability, +919871153775

Hozefa Merchant, Communications,, +919819592410


Quotes sheet

EAS Sarma, Former Secretary of India’s Ministry of Power,

“CFA’s analysis of project lending by financial institutions in 2017 for coal versus renewables raises important concerns for policy planners in India. In a way, it provides a 2017 snap-shot picture of the serious problems that the electricity industry faces today.

India is struggling hard to add renewable energy generation capacity to the maximum extent possible but its efforts in that direction have got overtaken by the imprudent decisions taken during the last decade to indiscriminately allow huge coal-based generation capacity to grow. From the point of view of climate mitigation efforts, the gains expected from the renewables will be totally neutralised by excessive burning of coal.

India’s power system has remained heavily tilted in favour of coal-based generation, a significant proportion of which is forced to back down during the off-peak hours for want of ready demand for electricity during that time. Instead of correcting this costly imbalance, more and more coal-based generation capacity was allowed to increase during the last ten years, though it was evident that it would remain under-utilised and the consequent costs would have to be absorbed either by the project promoters or the electricity consumers. In a political economy that encouraged consumer subsidies, it was the public sector utilities which were forced to bear the burden of these dis-economies.

Coal-based power projects also require large extents of land. There is hardly any land in India that can be called ‘waste land’ that could be readily given for an industrial project, as the rural population eke out their marginal livelihoods from land in one way or the other. Therefore, most new coal-based power projects in the pipeline faced stiff opposition from those who would get displaced. In the absence of a strong institutional framework to regulate pollution from such projects, the local communities resisted all such coal-based power projects to avoid pollution that would affect their health. As a result, many coal-based power projects have ended up in litigation and got stranded, leading to time and cost overruns. In such cases, the promoters sought refinancing of their debt. The cosy relationship between the project promoters and the public financial institutions allowed debt restructuring to exceed the prudent limits, which in turn hurt the viability of the financial institutions. Stranded coal-based power projects contribute to 20% of the total non performing assets of the financial institutions today.

CFA’s study succinctly captures this picture. During 2017, the bulk of the project finance went to coal-based projects, that too for refinancing the projects under construction. These projects are located largely in coal-rich Jharkhand, Chhattisgarh and Madhya Pradesh where there has been a rush in favour of setting up power projects based on captive coal blocks. The effort to add capacity of renewable energy is largely confined to Gujarat, Karnataka, Punjab, Tamil Nadu and Telangana. Except Telangana, all other of these States are located far away from coal mines.

CFA’s findings indicate that, if India persists on following the business-as-usual path, it would get fully logged into a highly expensive, polluting power supply mix that not only hurts the local environment and people’s health but also the global climate.”

Tim Buckley, Director of Energy Finance Studies, IEEFA, Sydney,, Mobile: +61 408102127

This CFA report on coal vs renewables lending is a timely reminder that while Prime Minister Narendra Modi, Coal/Finance Minister Piyush Goyal and Power Minister R.K. Singh have each given strong, unequivocal and continuous support to India’s much needed energy system transformation, the legacy problems of stranded assets in the coal power sector remain a key constraint on India’s banking system and hence on sustainable economic growth for India. CFA clearly identifies that commercial banks are underpinning and supporting the transformation, but State banks are lagging, probably reflecting their history of excessive and poor lending practices to the thermal power sector. It is definitely a timely reminder for India’s leading public banks to reduce stranded asset risk and endorse India’s global leadership role in accelerating the electricity sector modernisation, a critical move to a more sustainable growth platform involving energy efficiency, improved grid transmission and distribution capacity and efficiency, plus expanding renewable infrastructure investing. India’s National Electricity Plan 2018 calls for new generation and grid investments of US$30-40bn annually. This can’t be achieved without strong ongoing financial support from India’s leading public sector banks like SBI, PFC and REC in support of the strong lead being shown by India’s top power and trading houses like Tata, Reliance, Adani, Greenko, NTPC and PowerGrid Corp.


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