Rs 16K-crore green bond framework to cover funding across sectors

The framework is expected to cover funding of green and sustainable infrastructure across sectors such as roads, railways, urban transportation, and even agriculture and social sector

The finance ministry, after extensive consultations with the Reserve Bank of India (RBI), multilateral institutions, and other stakeholders, is ready with the framework for its maiden Rs 16,000-crore green bond issuance.

The framework is expected to cover funding of green and sustainable infrastructure across road, railway, urban transportation, agriculture, and social sectors, apart from renewable energy projects, Business Standard has learnt.

The framework is expected to be out later this week or early next week.

“The work on the framework is done. The decision on the announcement will be taken by Finance Minister Nirmala Sitharaman and Economic Affairs Secretary Ajay Seth,” said a senior government official.

“The framework will cover funding across sectors. We are not looking at the sectoral aspect of it as much as the ‘green’ aspect. Even if an agriculture or a social sector project is deemed green infrastructure, it will be eligible for funding,” said the official.

According to sources, some projects that could be the obvious candidates include renewable projects like solar, wind, etc, and urban transportation initiatives like electrification of road transport, Metro projects which meet certain criteria.

As part of its second half of 2022-23 (FY23) borrowing calendar (October-March), the finance ministry had announced it would issue sovereign green bonds (SGBs) worth Rs 16,000 crore. With this, India will join the club of 25 nations so far whose governments have issued bonds to exclusively fund climate sustainability and green infrastructure projects and initiatives.

Earlier, there had been talks within the government on providing some tax benefits to make these instruments more attractive to investors, Central Board of Direct Taxes Chairman Nitin Gupta had told Business Standard. 

“Discussions have taken place on this matter. It is a policy decision, but so far nothing has been finalised,” he had said. It is unclear if any final decision has been taken on the matter.

The government and the RBI had sought the assistance of multilateral bodies like the World Bank and also closely examined the existing framework of other countries with better developed green financing markets.

The money raised will go towards projects and initiatives which will help India meet its conference of the parties (COP) commitments.

India’s latest commitments, made at COP26 earlier this calendar year, include reaching 500 gigawatt non-fossil energy capacity by 2030, meeting 50 per cent of its energy requirements from renewable energy by 2030, reducing total projected carbon emissions by 1 billion tonnes from now to 2030, reducing carbon intensity of the economy by 45 per cent by 2030 over 2005 levels, and achieving the target of net-zero emissions by 2070.

According to the norm in most nations, the yields on green bonds are slightly lower than the benchmark rate — at around 10-15 per cent.

Sitharaman had first announced the Centre’s intention to issue green bonds in her 2022 Union Budget. “As part of the government’s overall market borrowings in FY23, SGBs will be issued for mobilising resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy,” she had said.

Decision soon

• Framework is expected to be out later this week or early next week
• As part of FY23 borrowing calendar, the finance ministry had announced it would issue sovereign green bonds worth Rs 16,000 crore
• India will join a club of just 25 nations that have issued such bonds