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Tata Cleantech May Fund $400 Million Projects in India

Tata Cleantech Capital Ltd. may fund as much as 25 billion rupees ($401 million) of renewable and energy-efficiency projects in India as costs for coal-based power prompt companies to turn to alternatives.

“The combined cost of grid power and diesel generators that many companies use today is higher than solar,” Avijit Bhattacharya, chief executive officer of the lender set up jointly by Tata Capital Ltd. and International Finance Corp., said in an interview in Mumbai.

That’s creating an opportunity to fund clean-technology projects that help companies reduce their power bills without relying on subsidies, he said. Solar power can be produced for as low as 8 rupees (13 cents) per kilowatt-hour compared to the 11 rupees that some commercial buildings outside Mumbai pay for electricity, he said.

India’s 29 gigawatts of renewable capacity was mostly built with the help of government subsidies and tax breaks. In the past year, falling renewable costs and rising fossil-fuel prices have made it possible in some cases for wind and solar to compete in the power market without support.

The average tariff for electricity sales in Maharashtra state, home to the financial hub of Mumbai, has risen by 71 percent in two years, according to data from the government’s Planning Commission and the Maharashtra Electricity Regulatory Commission.

SunEdison Model

Solar installations and energy-efficiency projects require large, initial investments and generate savings over time. Tata Cleantech, which began operations in April, plans to fund energy-services companies that will allow customers to reap those rewards without the capital outlay.

“Many companies are interested in the benefits, but they’re not keen to invest upfront,” Bhattacharya said in the interview on Nov. 29. “It’s the emergence of energy-services companies that will drive this sector in India. It won’t happen without them.”

Such companies could invest in a solar installation, run it, and sell the output under a long-term contract to a consumer at a competitive rate, he said. That model is similar to the one developed by St. Peters, Missouri-based SunEdison Inc., which has raised more than $3 billion in project financing from investors including Goldman Sachs Group Inc. to build 883 megawatts globally.

“We’re in advanced talks with a couple of them for potential funding,” he said, referring to energy-service companies that he declined to name. “We should see some action in the next four to six months.”

Tata Cleantech has participated in group loans to companies building about 350 megawatts of mostly wind projects. In the next five years, it expects to help fund 2,000 megawatts of renewable projects.

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