Banks ‘reluctant to fund’ waste-to-energy projects

Even as the Centre has formulated a policy to boost the use of bio-fuels in the country, players in the sector have raised concerns over funding difficulties for waste-to-energy projects.

Citing the uncertain scenario in the banking industry, the lenders have maintained a cautious approach in funding power projects, especially in the new sectors such as bio-fuels.

Banks’ reluctance

“Lending is a major issue at present. The public sector banks are reluctant to fund such projects mainly because of their mounting NPAs. Many of their NPAs have been in the power sector. This is an issue being faced by the larger industry. It is a big challenge for the bio-fuel sector,” Aditya Handa, Managing Director & CEO, Abellon CleanEnergy Ltd, told BusinessLine .

In order to meet the ambitious targets of employment generation and waste to wealth creation, the Centre approved the National Policy on Bio-fuels last month, which is aimed at enabling appropriate financial and fiscal incentives to the sector.

A senior official at a public sector lender said the sentiment is uncertain in the banking circles, especially about clearing of the loan proposals of new projects. “The power generation from biomass and bio-fuels is a new area and unproven at present. Hence, there is certainly a hesitation from the banks,” said the official, requesting anonymity.

According to industry estimates, typical investment for a waste-to-energy plant hovers around ₹9-15 crore per megawatt. Facing banks' reluctance, the private players have started exploring other funding avenues such development finance institutes such Power Finance Corporation, besides overseas investors such as venture capitalists (VC Funds) and companies, who have already implemented similar projects in other countries.

“But, they look for policy stability, especially since elections are approaching. There is initial interest from overseas investors but they are in wait-and-watch mode. We have to show some successful projects on ground,” said Handa.

Abellon has already set up four bio-mass-based power plants in Gujarat with capacity of 9.9 MW each and another 5 MW plant is being planned.

Foreign technology

Also, the company is sourcing technology from Singapore and other countries for turning urban waste into energy. In 2016, after the Gujarat government’s dedicated policy on waste-to-energy, clean energy solutions providers found a promising future.

Gujarat generates about 10,000-12,000 tonnes of urban waste daily, of which Ahmedabad alone generates about 3,500 tonnes. “There is a potential to generate 100 MW of energy from this waste. But the objective is not energy generation but to dispose of the waste in a safe and environment-friendly way,” said Handa.

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