India plans to spend nearly 44% more on green projects and schemes in the next fiscal year using sovereign bond proceeds, a senior official said. This underscores the government’s efforts to accelerate financing of clean energy projects, aimed at reducing the country’s carbon footprint and contributing to its ambitious 2070 net zero emissions target.
According to the expenditure plan prepared by the finance ministry for FY25, the government is looking to fund green projects and schemes worth ₹32,062 crore, compared to ₹22,324 crore this fiscal, the official told .
The funding requirement has been prepared based on proposals submitted by various ministries.
While the exact quantum of green bonds that will be issued in the next fiscal will be determined when the government finalises its borrowing calendar, given the higher funding needs, it may issue such papers worth ₹25,000-30,000 crore in FY25, up from ₹20,000 crore this year, the official said.
The estimated expenditure on green projects and schemes this fiscal is set to be ₹2,324 crore higher than the money raised through these bonds. The government had initially pegged the green funding requirement for FY24 at ₹23,764 crore. Given that the funds raised will have to be used strictly for green projects, the spending will be kept higher than the actual borrowing to assuage any apprehensions about potential misuse of such funds, officials told earlier.
To be sure, the government’s overall annual budgetary spending on green projects across sectors would far exceed this level. But such expenditures are not strictly segregated and classified as per the environment-friendly nature of the projects. However, since the government tapped green bonds for raising funds in FY23, it had to formally identify certain green projects to be funded by such proceeds.
Fund deployment
Nearly 47% of the green investments are proposed to be in railways in FY25, followed by projects in new and renewable energy (42%), housing and urban affairs (10%), environment and climate change (0.5%) and others, according to the expenditure plan firmed up for FY25.
AdvtRailways, new and renewable energy, and housing and urban affairs had also accounted for the bulk of the expenditure funded through green bonds in FY23 and FY24. Most of the proposed funding requirement (₹12,000 crore) relates to the production of energy-efficient electric locomotives, followed by solar energy (₹ 10,000 crore).
Economic affairs secretary Ajay Seth had on February 1 said, just like this fiscal, the green bond issue size for FY25 would feature in the Centre’s overall market borrowing plan for the fiscal second half.
