The Indian Renewable Energy Development Agency (IREDA) recently received approval from the Union Cabinet for an infusion of Rs 1,500 crore. This signifies an enormous step towards bolstering the nation’s renewable energy sector. As a result of this funding, IREDA would be able to provide loans approximating to Rs 12,000 crore within this increasingly important industry. Prior to this development, IREDA had launched a ‘whistle-blower Portal’ during ‘Vigilance Awareness Week 2021’.
Implication of the Allocated Funds
With the government’s equity infusion of Rs. 1,500 crore, IREDA is expected to create around 10,200 jobs per year. Moreover, it is projected to reduce CO2 equivalent emissions by approximately 7.49 Million Tonnes per annum. This demonstrates the dual benefit of this investment: promoting both employment and environmental sustainability.
The Effects on IREDA’s Operations
In addition to these broader impacts, this fresh injection of funds offers specific benefits to IREDA. Firstly, it equips IREDA to extend a loan of roughly Rs. 12,000 crore to the renewable energy sector. This funding could enable the development of an additional 3500-4000 MW capacity in the renewable energy sector.
Another effect of this equity infusion is the enhancement of IREDA’s net worth. An increased net worth will allow IREDA to provide more financing for renewable energy projects. This will enable it to contribute more effectively towards the government’s targets for renewable energy.
Lastly, this infusion increases the Capital-to-Risk weighted Assets Ratio (CRAR) of IREDA. CRAR, also known as the Capital Adequacy Ratio (CAR), is instrumental for ensuring financial organizations have a sufficient buffer to absorb losses before they reach insolvency. Therefore, this move will facilitate IREDA’s lending and borrowing activities.
About IREDA
IREDA is a ‘mini ratna’ company or public sector company conferred with certain autonomy, operating under the Ministry of New and Renewable Energy (MNRE). Since its establishment in 1987, it has specialized as a non-banking finance agency for the renewable energy sector. IREDA has a crucial role within renewable energy project financing. This role not only provides confidence to financial institutions and banks to lend within the sector but also acts as a catalyst for the growth and development of India’s renewable energy sector.
Source: PIB
