Carbon firm hopes India project to be funding model

* Says grouping projects together helps attract investors

* Seeking funding on limited recourse basis

KUALA LUMPUR, June 23 (Reuters) - A European-based carbon offset developer has grouped more than a dozen biomass projects in India in a deal it hopes will serve as a model to attract greater funding for clean-energy projects.

Funding for carbon offset projects has become increasingly tougher because of the financial crisis and uncertainty over the future of the Kyoto Protocol's Clean Development Mechanism beyond 2012, when Kyoto's first phase ends.

Project developers say many banks, particularly in developing countries, do not fully understand how the CDM works and that investors prefer large-scale projects.

"One of the issues we face in this market is the size of projects," said Sudhir Bhat, director of project finance for Asia and North America for Swiss-based First Climate.

"If you're looking at it from an investment perspective, particularly foreign investment, third-party equity and debt financing, a lot of these individual projects are fairly small.

"So to attract mainstream investors you've got to put them together," Bhat told Reuters at a carbon conference in Malaysia.