Reaching India’s renewable energy targets cost-effectively: a foreign exchange hedging facility

A major barrier to deploying renewable energy in India is a shortage of debt at attractive terms. Domestic debt in India has high cost, short tenor, and variable interest rates, adding 30% to the cost of renewable energy. Currently foreign debt is as expensive as domestic debt because it requires market-based foreign exchange hedging solutions. This paper investigates a government-sponsored foreign exchange facility as an alternative way for facilitating provision of foreign debt at attractive terms.