Govt to raise Rs 8,000 crore through first green bond auction on January 25

India’s first sovereign green bond is scheduled for auction on Wednesday through which the government plans to raise Rs 8,000 crore to fund projects like solar, wind and hydropower that will help in reducing the carbon intensity of the economy.

“The underwriting auction will be conducted through multiple price-based methods on January 25, 2023,” the Reserve Bank of India (RBI) said in a statement on Tuesday.

The bonds will be sold in five-year and 10-year tenors through a uniform price auction. Out of the total Rs 8,000 crore worth of bonds to be auctioned on Wednesday, half Rs 4,000 crore will be of five-year tenor. The rest Rs 4,000 crore will be of 10-year tenor.

Primary dealers may submit their bids for Additional Competitive Underwriting (ACU) auction electronically through Core Banking Solution (E-Kuber) system between 9 am and 9.30 am on the day of the underwriting auction, the RBI said.

In the Union Budget 2022-23, Finance Minister Nirmala Sitharaman announced plans to mobilise resources through the issuance of sovereign green bonds to fund green infrastructure projects. The government intends to raise Rs 16,000 crore through green bonds in the financial year ending March 2023.

The green bonds will be auctioned in two phases. The first tranche of Rs 8,000 crore will go for auction on January 25. The second set is due for auction on February 9.

Issuance of Rs 16,000 crore sovereign green bonds is a part of the overall budgeted market borrowing for fiscal 2022-23. The market borrowing for the current financial year is pegged at Rs 14.21 lakh crore.

“As a part of the government’s overall market borrowings in 2022-23, sovereign green bonds will be issued for mobilising resources for green infrastructure. The proceeds will be deployed in public sector projects which help in reducing the carbon intensity of the economy,” Sitharaman announced in the union budget for 2022-23 presented on Feb 1, 2022.

Green bonds are financial instruments that generate proceeds for investment in environmentally sustainable and climate-suitable projects. By virtue of their indication towards environmental sustainability, green bonds command a relatively lower cost of capital vis-à-vis regular bonds and necessitate credibility and commitments associated with the process of raising bonds.