India has asked state lenders to provide over $1 billion to government power distribution companies to clear longstanding debts to green energy firms that could hinder further investment, three sources familiar with the plan said on Tuesday.
The companies owe solar and wind power generators including Goldman Sachs-backed ReNew Power and Softbank-backed SB Energy over $1.35 billion, according to the Central Electricity Authority, an arm of the federal power ministry.
Adding to the problems of the power generators, a new government in Andhra Pradesh state - which owes renewable energy firms more than any other state - wants to renegotiate its contracts, saying the prices it pays are inflated.
The New Delhi government has asked state lenders Power Finance Corp Ltd, REC Ltd and IREDA to extend short-term securitised loans to the distribution firms at preferential rates, two sources in government and one in industry said.
Commercial banks are unwilling to lend to these firms because of their high outstanding debt.
The government wants to ease cashflow constraints and reassure wary investors that new projects are safe to participate in, one of the sources said.
"It is meant to show our intent to secure developers' revenues," the source said.
Foreign investment is central to India's green energy ambitions, and a slowdown in overseas funding could hurt Prime Minister Narendra Modi's commitment to increase adoption of renewable energy.
India is looking to install 175 gigawatt (GW) in renewable energy capacity by 2022, solar and wind power generators say.
Japan's SoftBank Group Corp has plans to invest up to $100 billion in solar power generation in India.
Andhra Pradesh, which accounts for about a 10th of India's renewable energy capacity, owes green energy generators $353 million, over a fourth of all dues.