India unlikely to offer tax sops for first sovereign green bond issue - source

By Nikunj Ohri

NEW DELHI (Reuters) - India's government is unlikely to offer any tax concessions to attract investors to its first issue of sovereign green bonds, a senior government official told Reuters on Thursday.

Despite that, it expects the bonds to be sold at a lower coupon rate than other government securities.

The plan to issue green bonds was first discussed by Finance Minister Nirmala Sitharaman in the 2022/23 budget as a part of overall market borrowing with the intention to use the funds to build green infrastructure.

The government intends to issue 160 billion rupees ($1.93 billion) of green bonds between October and March.

"Green bonds will not offer any incentives or tax concessions and we expect the cost of borrowing through green rupee denominated bonds to be reasonably lower than through G-secs (government securities)," the official, who did not want to be named, said.

The benchmark 10-year yield was at 7.4616% as of 0751 GMT, after ending at 7.4044% on Wednesday.

The official also said the government would target foreign investors with green mandates to subscribe to such bonds.

Currently, few domestic and foreign government bond investors have separate funds that exclusively target green securities.

The government has nearly finalised the framework, after working with World Bank and Danish firm CICERO Shades of Green, the official said.

CICERO Shades of Green helps environment assessments on green bond frameworks.

Investors are awaiting details on the projects that will be funded via the green bond, how they will be protected from risks associated with infrastructure projects in India and whether the funds will be segregated from regular government borrowing.

The finance ministry, World Bank and CICERO did not immediately comment.

The official said the timing and size of the green bonds would be decided by the Reserve Bank of India.

($1 = 82.8830 Indian rupees)

(Editing by Alison Williams)