Sovereign Foreign Currency Bonds : Use Only For Additional Import Reducing Solar Energy Projects

Sovereign Foreign Currency Bonds : Use Only For Import Reducing Additional Solar Energy Projects
Rajiv Upadhyay

Finance minister Nirmala Sitharaman in her maiden budget announced plans to raise $ 10 billion through foreign debt . The plan has run into difficulty due to its universal criticism .The basic objection of the critics is the fear of its misuse and long term ill effect on Rupee price parity with dollar. Future governments may use foreign debts to increase subsidy for electoral benefits .It could hurt our already sluggish economic growth .Although now it is known that Finance Secretary Garg had not briefed the cabinet adequately and has since been booted out but doubts expressed still remain valid.
Due to its bad public relation fall outs finance minister may not like to reverse the decision once announced in parliament.

An ideal way to overcome these objections is to use these funds for import substitution and the best such plan is to reduce the oil import by using these funds for advancing the solar power generation . The last rate of solar power received in competitive bidding were just Rs 2.47 per unit .This compares favourably with the latest coal based power production rate of Rs 4.9 / kwh in a 500 MW plant or NTPC rate of Rs3.47 in TNadu.India is importing $ 63 billion of crude oil .In physical terms India imports around 220 MT of crude oil every year and it is increasing by around 4.5 % every year. Similarly India imported about 234 MT of coal in 2018largely for power generation .
If we use the money received by the sale of sovereign bonds for projects which will reduce our import bill proportionately the investment will pay for itself in foreign currecy and will be well justified .

India had committed to produce 20 GW of solar power by the year 2022. It achieved the target in 2018 , four years ahead of schedule . The revised target is 100 GW of solar power by the year 2022. With extra availability of funds ,India could revise the solar power target to 200 GW . The funds for solar power projects are available easily in international markets . YesBank has financed $ 10 billion Projects in India. However to get full advantage of backward and forward linkage only Solar Pannels manufactured in India should be use although pro Chinese lobby will plead for open purchase .
The sovereign bond funds could be made available to Indian private sector in a power purchase agreement through competitive bidding . This will eliminate wastage of funds inherent in government projects.Thar desert and such spaces are available in abundance in  for large solar energy projects.There is no ecoogical or people’s displacemt fallout .

The alternative investments in nuclear wind and hydro power are not commercialy competitive to solar power at present. .So an inadvertent budgetary announcement could still be very productively used without any adverse fall out .

Government should seriously consider this option ofgainfully utilising the sovereign debt bonds.