The government on Wednesday gave nod to the final sovereign green bonds framework in line with the Budget announcement. The issuance of green bonds, which are intended to raise funds for public sector projects to help in reducing carbon intensity of the economy, will be for Rs 16,000 crore in the second half of this financial year.
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The proceeds from the green bonds, which are a part of the scheduled borrowing plan of the government, would be used to fund renewable energy, energy efficiency, clean transportation, water and waste management, pollution prevention and control and green buildings among others. Nuclear power generation, landfill projects, alcohol/weapons/tobacco/gaming/palm oil industries and hydropower plants larger than 25 MW have been excluded from the framework.
All eligible ‘green expenditures’ will include public expenditure by the government in the form of investment, subsidies, grant-in-aids, or tax foregone or select operational expenditures, R&D expenditures in public sector projects that help in reducing the carbon intensity of the economy. Equity is allowed only in the sole case of metro projects under the ‘Clean Transportation’ category, the framework said.
The Ministry of Finance has constituted a Green Finance Working Committee (GFWC) including members from relevant line ministries and chaired by the Chief Economic Advisor. The GFWC will meet at least twice a year to support the Ministry of Finance with selection and evaluation of projects and other work related to the Framework. Initial evaluation of the project will be the responsibility of the concerned Ministry/Department in consultation with experts.
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The allocation of the proceeds will be reviewed in a time-bound manner by the GFWC to ensure that the allocation of proceeds is completed within 24 months from the date of issuance. It will also bring out an annual report on the allocation of proceeds to the eligible projects along with details of projects financed, status of implementation, and unallocated proceeds. For every year, GFWC will meet to identify a fresh set of eligible expenditures in line with the framework in consultation with line Ministries. Once the Finance Bill is passed, Ministry of Finance will inform Reserve Bank of India (RBI) regarding the amount of eligible green expenditures for which proceeds from green bonds can be utilised.
The proceeds will be deposited to the Consolidated Fund of India (CFI) in line with the regular treasury policy, and then funds from the CFI will be made available for eligible green projects, the framework said. This Green Bond Framework has been reviewed by CICERO, a provider of second opinions on green bond frameworks.
Finance Minister Nirmala Sitharaman in her Budget Speech this year announced that the government proposes to issue sovereign green bonds to mobilise resources for green infrastructure. “The proceeds will be deployed in public sector projects, which help in reducing the carbon intensity of the economy,” she said in the Budget 2022-23.