Green financing: India auctioned ₹20,000 crore worth sovereign green bonds in FY24
The government auctioned sovereign green bonds worth ₹20,000 crore in FY24, compared to ₹16,000 crore in FY23 to mobilise resources for green infrastructure projects, particularly for expanding renewable energy capacity.
Besides, foreign direct investment (FDI) flows towards non-conventional energy surpassed $2 billion for the second consecutive year, the latest edition of the CEEW Centre for Energy Finance (CEEW-CEF) Market Handbook revealed.
“The Reserve Bank of India concluded four sovereign green bonds auctions of ₹20,000 crore (vs ₹16,000 crore in FY23), whose proceeds may be used to finance/ refinance eligible green projects,” the handbook pointed out.
All the sovereign green bonds (SGrB) in FY24 were oversubscribed, it added.
Sovereign green bonds
The SGrB offerings were 5-year (New SGrB 2028), 10-year (New SGrB 2033) and 30-year (New SGrB 2054 and 7.37 per cent SGrB 2054), the CEEW-CEF report said.
Apart from the 7.37 per cent SGrB 2054, all other offerings’ coupon rates were yield-based which after auctions came out to be 7.25 per cent, 7.24 per cent and 7.37 per cent, respectively, it added.
“In FY24, the repo rate remained pegged at 6.5. The SBI MCLR (1-year) rate was increased by 50 basis points twice in FY24, from 8.5 per cent in April 2024 to 8.65 per cent in March 2024,” the handbook pointed out.
In FY23, the SGrB were issued in two tranches of ₹8,000 crore each in January and February 2023.
The proceeds from these bonds are deployed in public sector projects, focusing on sectors such as clean transportation, renewable energy and sustainable water management. This will help reduce the economy’s carbon intensity in line with the commitments made under the Nationally Determined Contributions (NDCs).
Further to facilitate wider non-resident participation, the RBI last month decided to permit eligible foreign investors in the International Financial Services Centre (IFSC) to invest in SGrBs.
Foreign direct investment
The CEEW-CEF market handbook also noted that annual FDI addition in renewable energy (RE) as of Q3 FY24 amounted to $2.1 billion. In both FY23 and FY24 (as of December 2023), annual FDI addition remained above $2 billion levels.
After FY21, the FDI in RE sector witnessed a steep increase, amounting to around $7 billion till FY23, with the percentage share of RE sector in annual FDI inflow in FY23 growing to around 5x of its value in FY21.
RE share of total FDI is on a continuous upswing over the last 4 years, growing from a low of 1.3 per cent to 6.7 per cent in FY 24. The FDI in the power sector saw an increase over RE in Q3FY24, for the first time since FY20 amounting to around $1.2 billion, it added.
Under the extant FDI policy of the government, FDI in the renewable or non-conventional energy (RE) and power sectors is permitted up to 100 per cent under the automatic route.