About half of green bond proceeds are expected to be deployed in railroads this fiscal year, followed by projects in new and renewable energy (32%), housing and urban affairs (15%), environment and climate change (1%) and others .
A final announcement on the exact size and timing of the loan will be made in September, the person told ET.
According to the spending plan prepared by the Ministry of Finance for 2023-2024, the funds raised through these bonds will be spent to fund green projects worth Rs 23,764 crore, he said.
Since the funds raised will have to be used strictly for green projects, the expenses will remain higher than the actual borrowings. This will remove any apprehension that green bond proceeds are not being fully used for the purposes for which they are collected, the person said.
As for the railways, the funds will be spent on the production of energy-efficient electric locomotives, among other things. Green bonds will be part of the central government’s overall market borrowing plan for the second half of this fiscal year. The government had announced that it would borrow a total of Rs 8.88 lakh crore from the market through dated securities during the first half of 2023-2024, which constituted 57.6% of the target for the full year. . In 2022-23, the government issued the green bonds through two equal tranches of Rs 8,000 crore each.
A Green Finance Task Force, led by Chief Economic Advisor V Anantha Nageswaran, has been mandated to select projects from proposals submitted by various ministries.
Finance Ministry officials previously ruled out tax breaks for 2023-24 emissions, despite new demands from some market participants.
India’s first-ever sovereign green bond issuance in January drew a vigorous response, with orders exceeding the size of the Rs 8,000 crore offering by more than four times.
It yielded the bonds 5 to 6 basis points in “greenium,” which essentially means a favorable yield spread over similar issues without green credentials. Foreign investors stayed away.
According to the framework already approved by Finance Minister Nirmala Sitharaman, the sovereign green bonds will focus on financing public projects in nine areas, including renewable energy, climate change, clean transport, sustainable water, waste and pollution control.
