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Next sale of sovereign green bonds likely by September
The government plans to sell ₹15,000-16,000 crore of the green bonds in the second half of the next fiscal to fund public sector projects
India may sell sovereign green bonds for the second year starting 1 April to fund investments in solar, wind and hydro and other projects that mitigate the impact of carbon emissions.
The government plans to sell ₹15,000-16,000 crore of the green bonds in the second half of the next fiscal to fund public sector projects, two people familiar with the development said, requesting anonymity.
The proposed sale follows a similar plan announced late last year. The first tranche of green bonds worth ₹8,000 crore was sold on 25 January, while the second auction of another ₹8,000 crore will be held on 9 February.
Though the recent budget, which proposed a record market borrowing of ₹15.43 trillion, has not separately announced a sale of green bonds, the people cited above said the bonds may again be sold next year as several financially viable projects in the public sector are in the pipeline and funds raised through this route would be easily utilized.
The person, however, said the size of the sale in FY24 has yet to be worked out and would depend on the progress of projects and the utilization of funds raised for green projects in the current fiscal.
A query emailed to the spokesperson for the finance ministry on the size of green bonds remained unanswered till press time.
Responding to a question on green bonds, Ajay Seth, secretary of the department of economic affairs, said, “Issuance of sovereign green bonds is not off the table. The decision to go or not for green bonds next year and the amount to be raised through it will be decided when we decide the borrowing calendar for the second half of FY24, sometime in September.”
“Now, we have taken care of pre-requisites and have the building blocks and necessary conditions for green bonds. We have also done an external evaluation of green bonds. And one tranche has already been done on 25 January, and another is planned for the week. So, the money we are going to raise this year, we will utilize that money in the next fiscal before we go to the market for the next round of bonds tranche. When we raise money through the green bonds, the commitment is that it is used only for green projects,” the secretary said in an interview.
This year’s (FY23) auction of sovereign green bonds being conducted by the Reserve Bank of India (RBI) includes the sale of 5-year and 10-year papers bearing a coupon of 7.10% and 7.29%, respectively.
The funds raised by selling green bonds cannot be utilized for projects related to fossil fuel extraction, production, and distribution, or nuclear power. However, they can be used for government investments, subsidies, grants-in-aid, tax foregone, or operational expenses in support of climate mitigation and sustainable green initiatives aimed at reducing carbon intensity.
The sovereign green bonds are also expected to set the benchmark for private-sector fundraising through ESG-linked rupee bonds. The successful placement of government bonds will allow companies to secure funding for their green initiatives at competitive rates.
The central bank has already set up a sustainable finance group (in May 2021) to revolve the regulatory framework required for sustainable financing and climate risk. The government also released the much-awaited sovereign green bond framework in November. The proceeds from sovereign green bonds finance and refinance expenditure for eligible green projects that encourage energy efficiency in resource utilization, reduce carbon emissions, promote climate resilience and adaptation, and improve natural ecosystems and biodiversity, especially in line with sustainable development goals’ principles.
Green bonds are expected to strengthen India’s commitment to climate change and Nationally Determined Contribution (NDC) adopted under the Paris Agreement and help attract global and domestic investments in eligible green projects.
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First Published:6 Feb 2023, 11:19 PM IST
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