Finance

Published: November 6, 2023
Updated: November 6, 2023

Empowering Green Financing for Sustainable Transport: Key Strategies

Incentivizing Greener Transportation with Enhanced Green Financing

The challenge of reducing emission intensity in the transport sector is more pressing than ever, with the number of vehicles on Indian roads multiplying sixfold in this decade. This sector contributes to roughly 14% of total emissions, making it pivotal in achieving India's ambitious Net Zero emissions target by 2070. A multi-pronged approach, termed Panchamrit, is the government's strategy for this colossal task.

Shifting Modal Composition:

India is determined to revamp its inter-modal composition, moving away from road dominance towards railways and waterways. This change not only aligns with emission reduction goals but is also more cost-effective.

National Rail Plan:

The National Rail Plan aims to boost the share of rail transportation to 45% of the logistics market by 2030-31. This shift is expected to significantly reduce logistics costs, making it more competitive and efficient than road transport.

Multi-Modal Cargo Terminals and Dedicated Freight Corridors:

The development of Gati Shakti multi-modal cargo terminals and dedicated freight corridors is a step in the right direction. These initiatives will help reduce road congestion and save 450 million tonnes of CO₂ in the first 30 years of operation.

Promoting Waterways:

Investment in inland waterway vessels through the 'Make in India' initiative is crucial. Water transport has a significantly lower greenhouse gas footprint compared to road and rail, making it a green alternative.

Support for Electric Vehicles:

The growth of electric vehicles in India, with over one million on the roads, is a promising trend. Schemes like FAME-II and the development of 22,000 charging stations play a vital role in promoting electric mobility.

Clean Technology Manufacturing:

India is positioned as a clean technology manufacturing hub with tremendous potential. The combination of "Make in India" and a skilled workforce creates a lucrative opportunity in the clean technology sector, estimated to reach $300 billion by the end of the decade.

The Investment Imperative:

To bring these changes to life, substantial investments are required from both the government and the private sector. A significant part of this investment, approximately 5x higher than previous years, is expected to be green in nature.

The Role of Green Bonds:

Developing the domestic green bond market is essential. Green bonds currently constitute only a small fraction of total bond issuances in India. To encourage green financing, it's essential to continue the development of this market.

Enhanced Priority Sector Lending:

An enhanced limit for priority sector lending can incentivize banks to channel more funds into green financing. Providing access to low-cost capital is key to making this happen.

Tax Incentives for Green Investments:

Tax incentives, including green mobility funds for corporate social responsibility and coverage of additional issuance costs, can further drive investment in green bonds. Guarantee structures and commitments to extend term loans through interest waivers can enhance viability assessment measures.

Sustainable transportation is on the rise in India, and the opportunities in green financing for this sector are immense. To seize these opportunities, collaboration between the government, academia, and industry is crucial. As the nation strives for greener transport, it's imperative to implement these strategies for a sustainable and eco-friendly future.