Power Finance Corporation looks to fund Energy Efficiency’s purchase of 10,000 electric cars

Power Finance Corporation looks to fund Energy Efficiency’s purchase of 10,000 electric cars

Faced with a near-dry thermal power generation market which it funded so far, Power Finance Corporation (PFC) is exploring ways to fund purchase of 10,000 electric cars by Energy Efficiency Services Limited (EESL), according to an official familiar with the development.

This will be a first for the power sector-focused lender which has so far funded only thermal and renewable energy generation projects.

“PFC has talked to EESL on funding the purchase of the cars. Nothing has been finalised yet but it is under discussion,” the official said.

EESL has floated a tender to buy 10,000 electric cars which will then be used by various government agencies. It’s a two-phase tender under which 1,000 cars will first be deployed in the in the National Capital Region of Delhi and 9,000 cars put into service in the rest of the country later.

The cars will be air conditioned with both base and high-end models part of the project. The last date for bidding under the tender is September 26.

The overall size of energy efficiency market is estimated to be Rs. 74,000 crores. Till now, only 5 percent of this market has been tapped through energy service companies, mainly in the areas of lighting and some industrial applications. Large-scale implementation of energy efficiency is constrained by a number of regulatory, institutional and financing barriers.

PFC and REC are two power sector-focused lenders. Efforts of the current government notwithstanding, the fortunes of the power sector in the country have not really revived. While the governments UDAY programme has gone some distance in alleviating the pain of the state-owned distribution companies, the woes of the stuck private sector projects are yet to be mitigated, thus putting stress on the balance sheets of the lenders.

The government has shifted its focus to renewable energy generation projects with no new thermal capacity planned for the next five years. In such a scenario, PFC has few options. It thus has to step outside the bread-and-butter business of funding thermal power generation businesses and add new revenues streams.

PFC’s June quarter standalone net profit slipped 16.6 percent from the same period a year ago to Rs. 1,429 crores.

The Narendra Modi government has identified electric mobility as one of the drivers for resource efficiency in transport sector. Electric vehicles is high on the agenda of the transport minister Nitin Gadkari. The government plans to allow sale of only electric cars from 2030, a move being resisted by the automakers.

Also read: Switch to clean vehicles or be bulldozed: Nitin Gadkari to automakers

EESL is a joint venture company of public sector companies under the ministry of power—PFC, NTPC, Rural Electrification Corporation (REC) and Power Grid Corporation of India Limited (PGCIL).

It has been set up to create and sustain markets for energy efficiency with the objective of cutting energy consumption in the country by up to 20 per cent. It works closely with Bureau of Energy Efficiency and is a leading agency for spearheading activities under the Prime Minister’s National Action Plan on Climate Change.