India′s National Clean Energy (environment) fund: Recommendations for effective utilisation

Distributed renewable energy (DRE) is garnering increasing attention in India as a means of expanding energy access to unelectrified and under electrified segments of the population. As technology improves and prices fall, the renewable industry grows despite the global failure of energy pricing to factor in environmental and social costs and despite a lack of long-term and supportive policy conducive to the sector's growth. As reported by the International Renewable Energy Agency, distributed and mini-grid solutions are currently the most dynamic areas of renewable energy cost reduction.The Government of India (GoI) asserts that expanding access to unelectrified households while keeping up with population growth will require Rs 15,250bn in energy investment. The Planning Commission projects that this will require investments of Rs 1,098bn in RE by 2016, of which Rs 122bn is likely to be provided by the public sector. This will require that 90% of investment in RE come from the private sector. For which GoI needs to strategically leverage public funds such as the National Clean Energy (Environment) Fund. NCEF was presented as one of the important programs for combating Climate Change during the COP 20 in Peru, but with COP 21 to be organized in the end of 2015, the fund is yet to be channeled effectively.NCEF was created during the financial year 2010-11 and was financed by the “Rs.200 per tonne” cess on coal. The fund is housed within the Ministry of Finance with an objective to fund research and innovative deployment of clean energy technologies. The project proposal appraisal is done by an Inter-Ministerial Group (IMG) comprising of the Finance Secretary-Chairperson, Secretary (Expenditure), Secretary (Revenue), Principal Scientific Advisor to the GoI, representative of Planning Commission and the Ministry sponsoring and concerned with the proposal. The fund collected up till 2014-15 is Rs. 170.84bn of which Rs. 165.11 bn has been utilized and the graph below display's the performance of the fund.

Though over 96% of the fund has been utilized there are inefficiencies in the governance structure and operational modalities that has led to poor leveraging of the fund to benefit under-served communities. Some of the deficiencies of the fund and recommendations to overcome them are presented below:

Till date, the NCEF has only approved viability gap funding for larger projects, leaving the need for debt finance unmet, particularly for early stage enterprises that lack sufficient track record or collateral to secure debt from banks. NCEF can be valuable for enterprises to address the chronic challenges of high capital expenditure and high cost of debt. The table below suggests the needs of the enterprises involved in last mile delivery.

In order to meet the financing needs of enterprises NCEF can be routed through existing development banks.

NCEF is currently used to fund proposed projects as well as a number of GoI schemes related to energy and environment, including the JNNSM, the IREDA- NCEF Refinance Scheme and MNRE schemes such as “Grid Interactive and Distributive Renewable Power” and “Research Design, Development in Renewable Energy”.To benefit DRE enterprises NCEF could extend it support to schemes such as:

• Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE)
• DST, National Science & Technology Entrepreneurship Development Board programmes: Entrepreneurship Development Programme and Technology Business Incubator
• Bureau of Energy Efficiency Scheme for development and adoption of efficient and clean technologies.