MNRE/Solar Grading

The Indian government has launched the Jawaharlal Nehru National Solar Mission to promote ecologically sustainable growth while addressing India's energy challenge. To achieve this objective, MNRE considers providing capital and interest rate subsidies to make solar off-grid projects commercially viable and workable on a sustainable basis. The mission has envisaged that such entities receive accreditation by reputed rating agencies like India Rating and Research (Ind-Ra) for the submission of projects directly to MNRE.

Ind-Ra is the only international credit rating agency in India. Ind-Ra has considerable expertise in rating corporate, banking, public finance and structured finance transactions globally. We bring our expertise to serve the requirements of Indian issuers and investors. It is also among the rating agencies approved by MNRE for solar grading in India.

Product Definition

The grading would be done on a 5x3 matrix (5x3). This matrix will assess the entity on two broad parameters - performance capability and financial strength.

Financial Strength
Performance CapabilityHighModerateLow
HighestSP 1ASP 1BSP 1C
HighSP 2ASP 2BSP 2C
ModerateSP 3ASP 3BSP 3C
WeakSP 4ASP 4BSP 4C
PoorSP 5ASP 5BSP 5C

Validity of Grading

The grading will be valid for two years for entities with the highest performance capability (graded 1A/1B/1C); for all the other entities, the grading will be valid for one year, to offer them an opportunity to move up the grading scale.

Framework for assessment of Re-newable Energy Service Companies (RESCOs)
Performance Capability
1Promoter track record
APromoter's qualification and technical competence
BMonetary value of capacity installed
CPromoters track record
DQuality of management
ETie-ups with system integrators
2Project management capability
AO&M capabilities and tie-ups
BQuality of EPC contractors and equipment suppliers
CSupplier / EPC feedback
3Customer concentration, quality and ability to manage receivables
AQuality of customers
BCollection capability
Performance Capability Grading
Financial Strength
1Net worth
2Financial flexibility
3Banker's feedback
Project Related Assessment
4Gearing
5Debt service coverage ratio
6Interest cover
7Project IRR
Financial Strength Grading
Final Grade
Framework for Assessment of System Integrators
Performance Capability
1Promoter track record
ASolar capacity installed
BPromoter's relevant track record
CQuality of second tier management team
2Technical expertise and adequacy of manpower
ATechnical expertise
BAdequacy of manpower
3Quality of supplier and tie-ups
AQuality of suppliers
BSupplier feedback
4Customer and O&M network
ACustomer feedback
BO&M capabilities
Performance Capability Grading
Financial Strength
1Sales
2Return on capital employed
3Total outside liabilities / tangible net worth
4Interest coverage
5Net Worth
6Current Ratio
7Feedback of bankers on conduct of account and integrity
Financial Strength Grading
Final Grade

Grading Process

Entities wanting to avail subsidy from MNRE, need to be accredited / graded by Ind-Ra.


Product Fee

Fee Schedule for MNRE Grading
RESCO and System Integrators
Last year turnover (for existing entities) / Project cost (for new entities)
Solar PV Off Grid
Upto Rs. 5 crRs. 2 lakh
Rs. 5 cr - Rs. 15 crRs. 4 lakh
Rs. 15 cr - Rs. 25 crRs. 6 lakh
Rs. 25 cr - Rs. 50 crRs. 8 lakh
Above Rs. 50 crRs. 10 lakh
Solar Thermal Off Grid / Solar Water Heater
Upto Rs. 10 crRs. 2 lakh
Rs. 10 cr - Rs. 25 crRs. 4 lakh
Above Rs. 25 crRs. 6 lakh
Service Tax as applicable
Re-evaluation fee
50% of the first year fee, if done in subsequent year
75% of the first year fee, if done within two year's of the initial grading

* For claiming subsidy on grading fee, the entities will have to first pay Ind-Ra the entire amount of the fee for getting the grading done.

* The United Nations Development Program (UNDP) will subsidise 50% of the initial grading fees, subject to a maximum of Rs.2.5 lakh, under the Global Environment Facility. This subsidy on grading fees will be applicable only for published gradings.

FAQS

1. What is the Procedure to register as a Channel Partner?

RESCO, is an entity that will install, own and operate RE systems and provide energy services to consumers. These entities may tie up with financial institutions for accessing financial support under the scheme. These are, in fact, the only entities which will approach the MNRE on their own. Ind-Ra has a system of accreditation for these RESCO's. These entities can approach Ind-Ra to have themselves accredited and if they meet the minimum requirements laid down by MNRE, they would be in a position to approach the Project Appraisal Committee (PAC) with their proposal for a in principle approval.

The PAC would then provide the entity "in principle" approval and allow it to move forward with the implementation. The PAC would also specify that on completing the project, 50% of the funds would be made available automatically and the remaining on completing monitoring.

System integrators can approach the (PAC), with their project in the formats finalise to seek an 'in principle' approval. Since these are entities which would first interact with their market and build a project based on the tentative orders that they have been provided by their clients, the PAC would appraise the project on three basic parameters :-

(i) The ability of the entity to implement the project in terms of the skill set of their personnel.
(ii) Details of how parameters of quality would be met as per the standards specified by MNRE.
(iii) O&M Plan.

System integrators would however need to approach a bank/banks willing to have a three way tie-up with their clients, themselves and the bank. The bank/banks would also need to have a re-finance agreement in place with IREDA, NHB or NABARD. Based on the 'in principle' approval, the bank would be in a position to provide the lending support to the clients identified by the system integrators. It is envisaged that both the capital and interest subsidy would flow to the beneficiaries of the scheme only through the banking channel. The Requisite arrangements for providing this flow have already been clearly delineated in the re-finance scheme notified by IREDA.

2. How to submit a project proposal?

Formats for submission of proposal are given on the Website of the Ministry of Renewable Energy. Two sets are required to be submitted to PAC.

3. How will the project be Approved?

Once the proposal of the channel partner is received, an in- principle approval from PAC will be given within a maximum of 45 days. In case additional information is required, PAC will inform within 30 days. After full information is received, the proposal will be cleared in two weeks.

4. What is the subsidy disbursal mechanism?

The release of funds for the project will be back-ended as reimbursement on completion and verification thereof. However, for programme administrators, the release of funds could be front- ended, with instalments of 70% on sanction and 30% on completion. However, this could be extended to other entities on the provision of appropriate sureties. In respect of credit- linked capital subsidy and interest subsidy, the scheme would be implemented through IREDA, which will be the designated nodal agency for the disbursement of funds

5. What is the funding pattern?

MNRE would provide financial support through a combination of 30% subsidy and / or 5% interest bearing loans.

Capital subsidy of 90% of the benchmark cost would be available for special category states, NE, Sikkim, J&K, Himachal Pradesh and Uttarakhand. In addition, it would be extended for setting up only stand alone rural solar power plants/ packs (both PV and Thermal) in remote areas such as Lakshadweep, Andaman & Nicobar Islands, and districts on India's international borders. However, for funding solar thermal systems in these areas, the subsidy would be limited to 60% for all categories of beneficiaries.

The total project cost shall be funded through a mix of debt and incentives where the promoter's equity contribution would be at least 20% (unless otherwise specified).