On January 19, India’s Cabinet Committee on Economic Affairs (CCEA) and the Union Cabinet decided in a meeting to approve a Rs 1,500 crore equity infusion in the Indian Renewable Energy Development Agency (IREDA) Limited.
Later in the day, the union cabinet held a press conference to announce the news and explain how the equity investment will enable IREDA lend Rs 12,000 crore to the renewable energy sector. Furthermore, it would help the agency in increasing its net worth, allowing it to offer greater funding to the renewable energy sector.
This decision, according to the Centre, will strengthen the capital-to-risk-weighted-assets ratio (capital adequacy ratio), allowing it to expand its lending and borrowing operations while also creating about 10,200 job-years. Moreover, it will aid in the reduction of 7.49 million tonnes of carbon dioxide emission per year.
In Budget 2021, the Modi administration declared that the equity infusion of Rs 1,500 crore will allow IREDA to expand its lending facility by Rs 12,000 crore over and above its existing book size of Rs 27,000 crore, while also strengthening its capital adequacy, allowing the agency to borrow money at a lower interest rate, thereby decreasing borrowing rates for developers as well.
This equity infusion would also prompt IREDA to finance around 4,500 MW of renewable energy projects worth approximately Rs 18,000 crore, according to the 2021 Budget announcements.