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Govt of India Plans To Raise $3.3 Billion Through Green Bonds

The government of India is planning to raise billions of dollars by issuing up to $3.3 billion (equivalent) in “green bonds” to fuel its ambitious renewable energy targets, according to media reports.

According to Investopedia, “a government bond is a debt security issued by a government to support government spending and obligations. Government bonds can pay periodic interest payments called coupon payments. Government bonds issued by national governments are often considered low-risk investments since the issuing government backs them.”

These government-issued green bonds could be issued by the government-owned companies Power Finance Corporation, Rural Electrification Corporation, and Indian Renewable Energy Development Agency. These companies are believed to hold a majority share of the debt market for renewable energy projects in the country.  

At COP26 the Indian prime minister announced the target to have 500 gigawatts of renewable energy capacity by the end of this decade. Project developers will arrange for equity and debt funding on their own. However, the Indian government would endeavor to ensure availability of cheap debt to keep renewable energy tariffs low and attractive. Indian private banks and government financial institutions have in the past signed agreements with several multinational agencies like the German development bank KfW and the Asian Development Bank.

Apart from project development, the government also needs to invest in supportive transmission infrastructure to absorb the large quantum of renewable energy capacity planned to be added. The government of India has partnered with the German development bank KfW for development of the green energy corridors scheme — a dedicated transmission network for renewable energy projects. Similarly, the International Finance Corporation provided low-cost debt finance for infrastructure development at two solar power parks of 750 megawatts and 600 megawatts. The government and public sector companies are planning to set up large solar parks in Rajasthan, Gujarat and Ladakh and would prefer low-cost debt arrangements for them as well. 

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Written By

An avid follower of latest developments in the Indian renewable energy sector.


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