Centre expected to issue Rs 23,764-crore sovereign green bonds in FY24

The centre is expected to issue Rs 23,764.46 crore worth of sovereign green bonds in the coming financial year (FY24), as per the Expenditure Profile documents of the 2023 Union Budget. This compares to Rs 16,000 crore worth of maiden green bonds issued by the sovereign in FY23.

As per the plan presented in budget documents, most of the green bond proceeds will go to railways (Rs 12,479 crore) for production of electric locomotives, and constructions of new Kolkata metro lines, which the railways own.

The Ministry of New and Renewable Energy will get Rs 7,507.5 crore for its various schemes, the Housing and Urban Affairs Ministry will get Rs 2,609 crore for equity investment in various metro rail projects, and the environment ministry will get Rs 169 crore. This is however a provisional plan, and more projects could be added or some could be removed, sources said.

As per the Green Bond Framework issued by the centre last November, the proceeds from green bond issuances will be deposited in the Consolidated Fund of India in line with the regular treasury policy, and they will be then made available for eligible green projects.

The nine categories are renewable energy, energy efficiency, clean transportation, climate change adaptation, sustainable water and waste management, pollution prevention and control, green buildings, sustainable management of living natural resources and land use, and terrestrial and aquatic biodiversity conservation.

The projects will cover renewable energy, energy efficient buildings, electrification of public transport, climate resilient infrastructure, to organic farming, flood and climate warning systems to land and marine biodiversity projects.

The centre’s Green Bond Framework has been reviewed by CICERO, which has issued an independent Second Party Opinion. It has approved the alignment of the Sovereign Green Bond Framework with the ICMA Green Bond Principles.

The four core components as outlined by ICMA (International Capital Markets Association) green bond principles are: use of proceeds, project evaluation and selection, management of proceeds, and reporting. These are all being fulfilled by the centre’s framework.

Finance Minister Nirmala Sitharaman had first announced the centre’s intention to issue green bonds in her 2022 Union Budget. “As a part of the government’s overall market borrowings in 2022-23, sovereign Green Bonds will be issued for mobilizing 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.