Green bonds, Rs 19,500 crore PLI booster for solar modules ups India's climate game

NEW DELHI: The name’s Bond, green bond! India on Tuesday joined a select group of nations, with the Budget announcing the introduction of sovereign green bonds to have its skin in the global climate financing game for funding public sector infrastructure projects.

The Budget also signalled India’s intent to make the energy transition largely on its own steam with a booster dose of Rs 19,500 crore for an expanded PLI (performance-linked incentive) scheme to promote domestic manufacturing of high-efficiency solar modules, compulsory biomass burning at coal power plants and making energy audit of commercial buildings mandatory to boost ESCo (energy saving company) business.

“When energy transition and climate action become one of four pillars of the Budget speech, “it sends a strong signal of the government's intent to drive economic growth and employment through sunrise sectors focused on sustainability,” CEEW chief Arunabha Ghosh said.

“India will now join a select group of countries, primarily European, which have issued such bonds. We can also expect this move to catalyse the development of the domestic corporate green bond market,” Hetal Gandhi of CRISIL Research said.

Ghosh said using green bonds to fund public sector infrastructure projects would also help private players tap into a deeper green bond market. “Offering climate finance services through GIFT City suggests that India could aspire to become a hub of sustainability financing,” Ghosh said.

The additional PLI allocation is expected to help set up of 30-35 GW (gigawatts) of solar module capacity and 25-30 GW of cell capacity by 2024 as the country targets a 280 GW solar capacity by 2030.

“This will reduce dependence on imports, which stand at 90% for cells and 75-80% for modules currently. It will make India not only self-reliant for annual module needs but also open up export opportunities for domestic module manufacturers,” Gandhi said.

The Budget proposal of mandatory 5-7% co-firing of biomass pellets in coal power plants will reduce emissions and could curb stubble burning, saving an estimated 38 million tonne of CO2 emission a year. But the availability of pellets can be a hurdle unless states set up infrastructure to turn stubble into pellets.

In addition to announcing India's 'net zero' emission goal by 2070 at COP26, PM Narendra Modi had promised to meet 50% of the country's electricity requirement from renewables by 2030, and reduce the emissions intensity of GDP by 45% by 2030 from 2005 levels. Besides solar, electricity from wind, small hydro and biomass will figure prominently in the country's overall renewable energy target.