National green financing body on cards

The government is planning to set up a national institution to facilitate funding for green initiatives as it aims to achieve the net-zero emissions target by 2070.

Niti Aayog, the government's public policy think-tank, is studying green banks around the world to come up with an India-specific institution which will be responsible for aggregating green capital from different sources and lowering the cost of capital, a senior government official told ET.

According to the official, who spoke on the condition of anonymity, the Aayog is of the view that the present finance flows to key sectors that need to reduce carbon footprint are much lower than the desired levels.


"Hence, a dedicated national green financing institution is being envisaged to bridge the huge gap," the official added.

The Aayog is expected to lay out a mechanism for operationalising a potential national green financing institution with focus on hard-to-abate sectors such as steel, cement, shipping, fertilisers, automobiles, etc, which are crucial for India's economic growth.

Several options are being considered including setting up a bank modelled on the lines of National Bank for Financing Infrastructure and Development (NaBFID) or National Bank for Agriculture and Rural Development (NABARD).

Besides, it is considering repurposing existing institutions such as Indian Renewable Energy Development Agency (IREDA) as well as some green infrastructure investment trusts (InvITs) to ensure sustainable green financing to help the country achieve its net-zero commitments.

According to the World Bank, India's 2030 climate targets submitted under the Paris Agreement include reducing its economy's emission intensity by 45% compared to 2005 and increasing the share of non-fossil fuel-based energy resources to half of the installed capacity.

To finance these and other commitments, the country needs around $170 billion per year in investments though the current average is only $44 billion per year, it said.

In 2021, India's greenhouse gas emissions (GHG) amounted to 3.9 billion carbon dioxide (CO2)-equivalent tonnes, making it the world's third largest emitter, behind China and the US.

As per the 2024-25 economic survey, sovereign green bonds (SGrBs) worth ₹16,000 crore were issued in FY23 and ₹20,000 crore in FY24. As for FY25, so far, the government has raised 10-year SGrBs worth ₹11,697.40 crore and plans to rais ₹10,000 crore in the remaining period of H2FY '25, i.e., ₹5,000 crore each under 10-year and 30-year securities, respectively.