Indian Infrastructure Bank to Offer Credit Facility for Municipal Waste-to-Energy Projects
India's National Bank for Financing Infrastructure and Development (NaBFID) is introducing a credit facility specifically tailored for local municipal corporations seeking to harness waste for energy production.
This initiative encompasses three instruments to facilitate borrowing for waste-to-energy ventures:
* Credit enhancement program: Announced during the recent budget, this scheme aims to improve the creditworthiness of municipal issuers by providing partial guarantees in case of default.
* Direct rupee loans: Municipalities can obtain loans directly from NaBFID in Indian rupees.
* Bond issuance to bank: Municipal entities can opt to sell bonds directly to NaBFID.
Currently, much of India's urban capital expenditure relies on government grants and municipal revenues. However, experts estimate that the infrastructure deficit may require approximately 3.5 trillion rupees ($40.2 billion) in the coming years.
NaBFID's efforts aim to bridge this gap by offering alternative financing options, including municipal bonds. However, the market for municipal bonds in India remains nascent, with only about 27.8 billion rupees raised over the last eight years.
Target issue sizes and other specifics will be finalized based on feedback from potential borrowers. NaBFID plans to launch the credit product formally on February 6th, along with representatives from municipal corporations and consultants.
The partial credit guarantee will enhance the creditworthiness of municipal issuers, potentially increasing investor appetite. The exact coverage of potential losses is still under discussion.