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Govt readies green bond framework, taking 2nd view

 

Informist, Wednesday, Aug 24, 2022

By Sagar Sen and Krity Ambey

NEW DELHI – The government has completed inter-ministerial consultations and prepared the framework for issuance of sovereign green bonds. It is now in the process of seeking second party opinion on the framework, a senior finance ministry official said.

"We held consultations with ministries and also received technical assistance from World Bank to prepare a framework for sovereign green bond. Now we are taking second party opinion on the framework," the official told Informist.

EXCLUSIVE

"International Capital Market Association has laid guidelines for green bonds according to which we have prepared our framework. We will now select one of the Second Party Opinion agencies who will review the framework to help us spot areas of improvement," another finance ministry official said.

In the Budget for 2022-23 (Apr-Mar), the government had announced its intent to issue green bonds for the first time as part of its overall market borrowing.

Proceeds from the green bonds will be used in public sector projects that help decrease carbon footprint.

The official said the green bonds will be used to fund budgeted projects for 2022-23 (Apr-Mar).

In March, the finance ministry had said that it was in discussions with the Reserve Bank of India to prepare the framework.

The government is scheduled to borrow 14.31 trln rupees on a gross basis and 11.19 trln rupees on a net basis in the current financial year. Of this, it will look to raise around 200 bln rupees through green bonds, Informist had reported in February.

The government will look to include these bonds in the borrowing calendar for the second half of the current financial year.

"We are seeing that globally green bond are about 15-20 bps lower than the prevailing market rate. We will not issue these bonds if we are not comfortable with the rates we get," the senior official said.

The government is also in talks with potential investors to gauge the market appetite, he said. "Since green bonds are niche instruments and cater to a particular type of investors we need to understand their needs as well."

The government is yet to decide on the quantum and tenor of the green bond but may stick to a lower quantum for the first year, he said. The quantum and tenor of green bond will be decided by September before the Oct-Mar borrowing calendar is announced.

Globally, green bonds offer the benefit of lower cost of borrowing since several jurisdictions offer tax incentives for environmental social and governance investing. India, however, does not offer any such benefits at present.

Finance Secretary T.V. Somanathan had told Informist in an interview that the green bonds will be issued only in the domestic market. End

Edited by Akul Nishant Akhoury

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