Ahead of the announcement of the borrowing calendar for the second half of the current financial year, the green finance working committee, headed by chief economic adviser V Anantha Nageswaran, will soon finalise the size of the sovereign green bond issuance against the Budget estimate of Rs 23,765 crore.
For the first time, the Centre mobilised Rs 16,000 crore through two tranches of green bonds in January-February of the previous financial year. However, the actual utilisation of green project financing was Rs 18,377 crore in FY23, Rs 2,377 crore more than funds mobilised through these papers.
As against the FY23 revised Budget estimate of Rs 17,168-crore sovereign green bond issuances, the estimate for FY24 is Rs 23,765 crore.
“The committee, headed by the chief economic adviser, has asked ministries to project their requirement in the current financial year and plans for the next financial year,” an official said. After the details are collected, the finance ministry will announce the actual green bond issuance size during the release of the H2FY24 borrowing calendar by the end of September. There was no green bond issuance in H1FY24.
Proceeds from green bonds are used to fund solar power projects, small hydro projects and other public sector projects which help reduce the carbon intensity of the economy.
The Centre may tweak sovereign green bond issuances if the ‘greenium’ to be offered on such bonds is not attractive. The cut-off yield on the green bonds — 5-year and 10-year papers — was 2 to 4 bps lower than traditional G-Secs of comparable maturity in the second tranche of Rs 8,000 crore on February 9, 2023.
The government was not happy with the outcome as it wanted a higher ‘greenium’ or cost advantage to the issuer compared to conventional bonds.
Once the green bond issuance size is approved, the Centre keeps on spending on green projects without waiting for bond issuances during the year. After bonds are issued, proceeds get adjusted against such investments according to the global practice.