Of almost ₹58,000 crore to be raised from FY23 to FY25, about ₹14,330 crore has been allocated for metro rail projects nationwide, while the railway ministry is to receive ₹31,070 crore to boost the production of energy-efficient electric locomotives, the people said.
A part of the proceeds went to renewable energy initiatives. The PM Kisan Urja Suraksha evam Utthaan Mahabhiyan (KUSUM) scheme, a flagship programme of the ministry of new and renewable energy, was granted ₹3,763 crore. The ministry’s objectives include de-dieselization of the farm sector, provision of water and energy security to farmers, increasing the income of farmers, and curbing environmental pollution.
Wind energy projects secured ₹2,983 crore and grid-connected solar schemes received ₹7,263 crore. The National Mission for a Green India, a part of the National Action Plan on Climate Change, received ₹350.67 crore for afforestation initiatives in the states.
“Mobility projects, particularly metro rail and energy-efficient railways, have received a large share of funding as part of the broader effort to cut emissions and enhance urban connectivity,” the first person said on condition of anonymity. “Beyond transportation, channelling green bond proceeds into renewable energy and afforestation initiatives ensures a comprehensive approach to meeting India’s net-zero goals.”
Sovereign green bonds, a fixed-income instrument designed to finance projects with environmental benefits, were first issued by the Indian government in FY23. According to the government’s framework for sovereign green bonds, it intends to achieve the target of net zero emissions by 2070.
Limited ‘greenium’
The central government, through the Reserve Bank of India, plans to issue about ₹58,000 crore in sovereign green bonds by FY25, with an additional ₹25,342 crore planned for FY26. This includes ₹16,000 crore in FY23, ₹20,000 crore in FY24 and a projected ₹21,697 crore in FY25.
The actual amount allocated for schemes through the sovereign green bonds in FY24 was ₹20,785.60 crore compared with ₹20,000 crore raised. The additional spending of ₹785.60 crore was incurred by the government.
Any expenditure exceeding ₹21,697.40 crore in FY25 is expected to be incurred from the government’s general revenue, the finance ministry said in its FY26 budget documents.
“With nearly ₹58,000 crore raised since 2022-23, these funds are driving investments in clean mobility, renewable energy, and afforestation, reinforcing our commitment to a low-carbon economy,” the second person said, asking not to be identified. “However, the government may shift away from green bonds in favour of conventional government securities and other debt instruments for green financing in the coming years as the returns on these sustainable bonds have remained modest (and have not bettered conventional bonds).”
Modest returns
On 7 February, Mint reported that the central government may pivot from green bonds to conventional securities to fund green projects because these bonds have yielded only modest returns. While developed markets see a “greenium” of 3-8 basis points, India’s has been limited to 2-3 bps, reflecting lower investor willingness to accept reduced yields for green investments.
Greenium is the difference between the yield or the returns that investors receive on a green bond and that from a similar conventional bond.
Spokespersons of the finance, railways and new and renewable energy ministries didn’t respond to emailed queries.
Proceeds from the sovereign green bond were used to fund several metro projects – ₹1,553.54 crore for Delhi Metro (Phase 4), ₹1,606.97 crore for Patna Metro, ₹1,455.05 crore for Bengaluru Metro (Phase 2), and ₹922 crore for Surat Metro.
Other allocations included ₹944.45 crore for Indore Metro, ₹933 crore for Kanpur Metro, ₹695.25 crore for Agra Metro, ₹663 crore for Mumbai Metro (Line 3), and smaller amounts for metro projects in Ahmedabad, Bhopal, Nagpur, and Kochi.
The Kolkata Metro expansion, including its airport link, received ₹4,154 crore over the past three years, while the Joka-Majherhat Phase I metro project secured ₹2,494 crore.