The programme was formally launched by Canara Bank in January 2003 and actual implementation started only in April 2003 when all the contract formalities had been completed. The Syndicate Bank formally launched the programme in February and actual implementation began in June 2003. To date four solar vendors have met the qualification criteria (Selco, Shell Solar, Tata BP and Kotak Urja), and therefore can now send their customers to either Canara or Syndicate bank branches for SHS financing.

A target was set of 5,000 systems financed over the first two years, and 18,000 over the 4-year programme.

Programme progress to date has been quite promising. From the period April-September 2003 (6 months of Canara Bank and about 4 months of Syndicate Bank’s operation), 1672 SHS loans were approved and disbursed. Furthermore, during an audit of bank branches in January 2004, it was apparent that loan disbursement has picked up, indicating increased sales. According to tentative estimates, by March 30, 2004, Syndicate Bank alone has financed about 2000 SHS. The banks had set ambitious targets for themselves and although they were not unhappy with the outcome so far, they are keen to take steps to improve performance further. Considering that this is still the initial period of loan programme stabilization, it is expected that the programme will surpass the two-year 5000 target ahead of schedule, possibly in the first year.

In terms of comparing these figures with a baseline, before the launch of the UNEP programme in Karnataka a total of only 1380 loans had been approved in the state for SHS over the previous 5 years. These were through Syndicate Bank (300 units), Malaprabha Grameen Bank (1,016 units), and Varada Grameen Bank (64 units).

Another heartening development has been the interest shown by some other banks, notably Vijaya Bank and Corporation Bank to implement an initiative along similar lines. Although it has not been possible to include them in the programme in order to avoid crowding for the limited programme funds, Vijaya Bank has launched the loan programme without any subsidy. Corporation Bank is also considering launching the loan programme without any subsidy. UNEP has assured them of the technical support, if required.

The partner banks are also considering launching the loan scheme in other states after some experience has been accumulated. Replication will be easy due to their reach across India.

2. Conclusions

RE has tremendous potential to provide energy and electricity to the people in developing countries who lack access to modern energy sources. In India, the high cost of RE compared to conventional energy is still a matter of concern but with the right packaging and approach, Solar Home Systems can fill the gap and provide access to modern energy to a large number of households, particularly those in rural areas who lack access to electricity. A properly designed programme, involving stakeholders during design as well as execution stage, can help develop markets for RE, as evident from early indications from UNEP’s SHS Financing Programme in India. Continuous monitoring and involvement of stakeholders at all stages of execution remains key to good programme progress. Eventually though, the success of the programme will be assessed in its ability to transition the market from a subsidised to commercial market. The programme design has considered this by gradually increasing the interest rate to market rates. The expanded market for vendors, coupled with confidence of the financing institution is expected to ensure that consumers benefit as the effective cost to them may remain same even after the programme has ended.

Acknowledgements: The UNEP programme on PV Solar Home System Financing in Southern India has been supported by funds from UN Foundation and Shell Foundation. The data on SHS sales and other items has been provided by partner banks in India; Canara and Syndicate Bank, and the vendors, viz., Selco Solar Light India, Shell Solar India, Tata BP Solar India and Kotak Urja, India. The programme support in India has been provided by Crestar Consultants, India. Authors would like to thank Andrew Smith for support with paper preparation.