In A First, Indore Plans To Issue Municipal Green Bond To Retail Investors For Solar Plant

Indore is planning to launch the first municipal government bond in the country aimed at private retail investors, with the revenues going toward a solar power project. Divyank Singh, chief executive officer of Indore Smart City who is coordinating with numerous stakeholders to complete the offering, informed that the Indore Municipal Corporation aims to earn up to Rs 260 crore ($31.8 million) through a 10-year bond sale next month.

Feeling Of Belongingness

The offering from Indore is also scheduled to be the country's first municipal green bond targeted at retail investors. Singh informed that the primary managers of the offering would be AK Capital Services Ltd. and SBI Capital Markets Ltd, reported Deccan Herald.

Singh said they could have funded the power plant by acquiring money from banks or private businesses, but instead, they have opted to reach out to the people because it offers a feeling of belongingness. He added that the issue represents an alternate, new form of finance for the town and creates opportunities for others to follow suit. The 60-megawatt solar facility would be built close to Indore at the cost of 3 billion rupees and will allow the city to save as much as 250 million rupees per month on its power costs.

Why Choose Municipal Bonds?

The World Bank has calculated that the third-largest economy in Asia would need to invest $840 billion in urban infrastructure in the next 15 years to fulfil demand from a rapidly expanding urban population, which has led to the green debt sale. The central bank of India, too, has urged local governments, which rely primarily on grants or bank loans for finance, to think about issuing municipal bonds.

Similar to conventional bonds, green bonds are financial instruments issued by an issuer to raise money from investors. A green bond differs from regular bonds, though, in that the proceeds of an issue are "earmarked" for use in financing green initiatives.

To fund its initiative for a 24-hour water supply, the Pune Municipal Corporation obtained Rs 200 crore using municipal bonds in June 2017 at an interest rate of 7.59 per cent, becoming the first Indian city to do so. With help from the Office of Technical Assistance of the US Treasury Department, Vadodara became the second city in India to issue a municipal bond earlier this year.

Also Read: India Saves $4.2 Billion In Fuel Costs Through Solar Power From January To June 2022: Report