(Bloomberg) -- India is going to test markets again with a plan to sell around 120 billion rupees ($1.4 billion) of green debt in the second half of the fiscal year, according to people familiar with the matter.
This comes after they sold only a seventh of 120 billion rupees of notes on offer in the six months to September as traders demand a higher premium to buy such notes.
The government accepted bids only for 17 billion rupees at the Aug. 2 auction, as against a plan to sell 60 billion rupees of bonds. They didn’t accept any bids at a sale in May.
The lukewarm response to India’s green bonds contrasts with the enthusiasm seen for their conventional peers. Global funds snapped up Indian bonds at a rate not seen in seven years amid a landmark index inclusion by JPMorgan Chase & Co. in June. Only a tiny share of about $12 billion of such inflows has gone into green bonds.
Officials will continue to evaluate if market participants offer a premium, the people said, asking not to be named as the deliberations are private. The final decision on the amount will be taken in the upcoming borrowing meeting in late September, the people said.
Failure to secure lower borrowing costs in past auctions has discouraged the government from increasing the supply. The planned issuance in the first half was equivalent to the amount that regularly gets sold at a single auction for frequently traded tenors such as the 10-year benchmark conventional bond.
To ignite interest in the category, India will allow the trading of green debt from its newest finance hub in Prime Minister Narendra Modi’s home state of Gujarat by March. But lower taxes may not be enough to lift their appeal amid a lack of supply and small issuances.
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