After corporates and banks, the government has now decided to issue Green Bonds. In her Union Budget speech, Finance Minister Nirmala Sitharaman said the government will be issuing sovereign Green Bonds for mobilising resources for creating green infrastructure.
This issuance will be part of the government’s huge overall market borrowing of ₹14.95-lakh crore in FY23.
The proceeds will be deployed in public sector projects, which help in reducing the carbon intensity of the economy, the said the Minister.
Green Bonds are those issued by any sovereign entity, inter-governmental groups or alliances and corporates, with the aim that the proceeds of the bonds are utilised for projects classified as environmentally sustainable.
“One of the interesting initiatives in the Union Budget 2022 is the plan to issue Sovereign Green Bonds...The green bond market is globally expanding at a fast pace and this will help India access long term funds at a competitive rate.
“This will also improve the ESG (Environmental, Social and Governance) climate in the country,” said Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research.
Nandita Tripathi, Partner and Tax Sector Head- ENR, KPMG in India, observed that use of green bonds for environment-focussed projects is expected to boost financing for clean energy.
“India started issuing green bonds since 2015...Green Bonds constituted only 0.7 per cent of all the bonds issued in India since 2018, and bank lending to the non-conventional energy constituted about 7.9 per cent of outstanding bank credit to the power sector, as on March 2020,” according to an article, ‘Green Finance in India: Progress and Challenges’, in RBI’s January 2021 monthly bulletin.
Around 76 per cent of the green bonds issued in India since 2015 were denominated in US Dollar, said RBI officials, Saurabh Ghosh, Siddhartha Nath and Abhishek Ranjan, in the article.