Kumar Mangalam Birla-controlled Aditya Birla Nuvo Ltd will sell 49% stake in its wholly owned subsidiary Aditya Birla Renewables Ltd to a unit of international private equity firm Abraaj Group to build a renewable energy platform focused on developing solar power plants in India.

The Abraaj Group is a leading private equity investor, managing approximately $9 billion of funds and operating in the growth markets of Africa, Asia, Latin America, the Middle East, and Turkey.

Funds managed by the Abraaj Group have made over 140 investments across 10 sectors, including consumer, energy, financials, healthcare and utilities, its website said.

“As per the SSA, subject to the customary closing conditions and subject to the requisite approvals, Aditya Birla Nuvo and AEIF Mauritius SPV 1 Ltd will hold 51% and 49% of the paid up share capital respectively, in Aditya Birla Renewables,” Aditya Birla Nuvo said in the filing.

The deal comes at a time when the government is pursuing an ambitious target to generate 175,000 megawatts (MW) of green energy by 2022. Of the total 100,000 MW of solar power capacity planned, 20,000 MW will come from solar parks and 40,000 MW each from roof-top and distributed generation projects. The government plans to set up 25 such solar parks. India has around 300 days of sunshine per year.

In July, Japanese telecom and Internet company SoftBank Corp. said it will set up a 20 gigawatt (GW) solar power plant in Andhra Pradesh. SoftBank, along with Bharti Enterprises Ltd and Taiwan’s Foxconn Technology Co. Ltd, in June proposed to invest at least $20 billion in solar energy projects in India through a joint venture, SBG Cleantech.

The Gautam Adani-controlled Adani Group has also started acquiring land to set up a solar park in Tamil Nadu, tipped to be among the world’s largest, with an outlay of Rs4,536 crore.

In July, the board of Aditya Birla Nuvo had approved participation in the bidding process for upcoming central, state and private sector solar power projects.

The proposed entry into the power sector comes eight years after the group exited the power generation business when it sold two proposed 1,000 MW projects and liquidated another one soon after it had completed first-stage work, including land acquisition and environmental clearances.

India needs as much as $200 billion to meet its target of installing 100,000 MW of solar power capacity and 60,000 MW of wind power capacity by 2022.

As a part of India’s energy supply, Prime Minister Narendra Modi is focusing more on renewable energy. The focus is basically on solar projects which can be known from the 2014-15 budget declared by Finance minister Arun Jaitley. There is a plan to build 100,000 solar powered pumps and pumping stations. The plan also includes building of canal-top photovoltaic solar arrays. These plans are being supported by the elimination of import tariffs meant for manufacturing of wind turbines and solar panels. For supporting the usage of renewable energy, the levy on coal has been increased from Rs.50 to Rs.100.

These budget initiatives are appearing to be inadequate according to different groups. The budget has received harsh comments from these groups. Irrespective of the harsh criticism, Modi’s administration focuses on introducing renewable energy sources in India. As India is basically dependent on coal which is imported, more percentage of coal is used for electricity generation and the supply cannot fulfil the rest of the energy requirement. The illegal allocation of coal mining has also diminished the availability of energy source in India. The need can be better fulfilled with renewable energy.

The supply constraint and growing demand for renewable energy provides a strong penetration to developing countries like India. Though there exist other players like United States and European countries, India can gain from the competition too. The cost parity of the fossil fuels must stand closer with renewable energy in India though in United States, the fossil fuel stands at a low price because of the flood of supply. Maintaining cost parity between fossil fuel and renewable energy can be the result of handling India’s budget deficits.
The renewable energy can be distributed with more efficacies in comparison to electricity. Due to theft and poor wiring, the distribution of electricity has not reached millions of people. But the renewable sources are more reliable to reach those houses who have not received electricity yet. The aim to electrifying India’s villages has failed due to some of policies. Local units can provide better service than large networks which have to undergo different stages before transmitting electricity. The renewable energy can be transmitted through local units easily which can reach millions of houses established in remote India.

Modi’s administration is prioritizing the economic development of India. It has an aim to eradicate poverty and electrify all the houses that do not receive electricity. For this reason, Modi skipped the “2014 September Climate Summit”. New environment minister Prakash Javadekar believes that safety of environment and climate is more of the responsibility of developed countries not of developing countries like India where till today 20% of people do not receive electricity.

The electricity scarcity can be managed through the introduction of renewable energy. Unlike Germany and Spain, India must focus on the technical aspect of establishing renewable energy. With technical advancement, India must commercialize the renewable energy so that it can reach to every corner of India. By boosting research and development and establishing small scale projects, India can provide renewable energy to every house.

India must try to stay ahead of other countries in establishing low-cost manufacturing of renewable energy technologies. This can contribute greatly towards the Modi administration’s new “Make in India” campaign. India can provide low-cost labour and technology which can be great for establishing renewable energy too.