Public sector banks in the country funded more coal projects than renewable projects in 2017, according to the latest report issued by the Center for Financial Accountability (CFA), a financial institution monitoring institute.

In contrast, government-owned banks and private financial institutions have invested more in renewable energy projects than coal-based projects, stated the report.

There seems to be a disconnect between the government push towards renewable energy and the priorities of government owned banks in India. While the Modi government set a steep target of installing 175 GW of renewable energy by 2022 not much seems has gone into making sure there are financial resources available to support this ambitious goal.

The report profiled 12 coal generation projects with a total capacity of 17 GW which obtained a total of ₹607.67 billion (~$9.35 billion) in loans amounting to 73 percent of all lending, whereas only ₹229.13 billion (~$3.50 billion) was lent for renewable energy projects in 2017, making up only 27 percent.

“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,” Joe Athialy, the executive director of CFA said.

The report reviewed 72 energy projects, comprising both coal-fired as well as renewable energy generating projects, which reached financial closure in 2017.

Out of the top 10 coal power projects lenders, eight were found to be government owned banks or financial intuitions: Rural Electrification Corporation, SBI, IIFC, Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank, and Power Finance Corporation. Together, they collectively gave loans of approximately ₹303.37 billion (~$4.5 billion).

Interestingly, half of the top 10 lenders for 60 renewable power projects (both solar and wind) were commercial financial institutions. These include: L&T Finance Holdings, Yes Bank, IndusInd Bank, IDFC, and PFS. The report also highlighted that 76 percent of renewable project financing was primary financing and 24 percent was refinancing of existing projects.

Most of the lending is concentrated in 14 states of the country. States like Karnataka, Punjab, Tamil Nadu, and Telangana did not have any lending for coal projects.

Earlier, Mercom reported that the Rural Electrification Corporation (REC), a public sector unit of the government of India involved in financing all segments of the power sector, planned to increase loan disbursements for the renewable energy sector to 4-5 percent by 2022.

In the last financial year, the renewable energy segment received ₹34.18 billion (~$0.51 billion) from the REC, which amounts to only one percent of its total outstanding loan amount of ₹2,390 billion (~$ 35.41 billion) that is available for the sector.

Recently, the Coal Vision 2030 report commissioned by Coal India Limited (CIL),  shed light on the increasing significance of renewable sources, especially solar, which could soon become key substitutes for coal-fired power in India.

The report does not seem to be exhaustive and these numbers should only be looked at as a snapshot rather than a complete picture of lending in the power sector in India.