India is looking at several avenues to finance its ambitious plans to expand renewable energy capacity. The Indian government has reportedly asked at least 8 financial institutions to raise funds for renewable capacity expansion. These funds are expected to be raised through issuance of green bonds.
Public sector entities like Rural Electrification Corporation, Power Finance Corporation, IDBI Bank, Indian Renewable Energy Development Agency, and private sector entities like India Infrastructure Finance Limited, ICICI Bank, and Yes Bank, have all been asked to issue green bonds to raise funds for renewable energy projects.
While media reports have not provided details of the bonds, they may be issued to foreign as well as domestic investors. The Indian government has incentivised infrastructure bonds by making investing in them tax free. A similar approach may be taken to attract domestic investors.
Dollar-denominated green bonds may be issued to foreign investors. Yes Bank recently raised $150 million through India’s first green bond issue. The response to Yes Bank’s green bond issue was overwhelming, raising double the amount it had initially targeted. The International Finance Corporation is believed to have expressed interest in investing in such green bonds.
The Indian Export-Import Bank raised $500 million through the first dollar-denominated green bond issue in India. India offers very high deposit rates compared to developed countries where the green bonds market has been traditionally centred. Thus, rupee-denominated bond issues are expected to be much more attractive, as has been the case with the Yes Bank issue.
India plans to increase its renewable energy capacity from current 35 GW to 175 GW by 2022. This includes fresh solar power capacity addition of 97 GW.
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