Through the Looking Glass: Attracting large pools of capital for green transition

Source: Financial Express, 17 June 2021

Large funding requirements in India require support from policymakers to crowd-in private investment from other countries, companies and carbon markets

India is a signatory of and strong advocate for the United Nations Framework Convention on Climate Change (UNFCCC), and the only large country on track for emissions reduction as agreed under the Paris convention. These transitions are expected to be net positive for the economy from cleaning up emissions, creating new jobs, and fostering economic growth. The International Energy Agency (IEA) estimates that India will need to invest $1.4 trillion over the next 20 years in the process.

Transition to clean energy will require financing to meet these large investment needs. Such investments include technologies that may be (1) nascent and hence susceptible to failure even after deployment of significant capital, (2) expensive and hence unaffordable by citizens and consumers of some countries, or (3) simply too novel or patent-protected for seamless transfer between various nations. Green financing requires finding the right capital willing to take risks of failure, or willing to underwrite relatively lower returns, or bundle technology together with financing.

We look at the three Cs of green financing.

Countries

Countries are committing to net zero targets over the next 3-4 decades. As we head into the 26th meeting of the Conference of the Parties (COP 26) later this year, pressure on such commitments by countries will increase. These thoughts have echoed on global negotiating table for years, especially at Cancun COP in 2010 where the communiqué said: “[I]ndustrialized countries committed to provide funds rising to USD 100 billion per year by 2020 to support concrete mitigation actions by developing countries that are implemented in a transparent way. These funds would be raised from a mix of public and private sources.”

The Green Climate Fund (GCF) was hence created. Per its 2020 annual report, the stock inflow pledged (over the years of its operations till date) is about $10 billion and the projects financed are about $7.5 billion. This is possibly a slower start than expected in Cancun. The recent change in political priorities towards climate change around the world means that funds like the GCF could see renewed large inflows. Such funds can become appropriate conduit for financing high-risk or long-gestation technologies in developing countries.

Similarly, the Global Environment Facility (GEF), set up by 40 donor countries, including the US, the UK, Germany, France and Australia, has so far funded 78 projects worth $570 million in grants and $4.8 billion through co-financing in India.

Companies

Large fossil fuel companies have been in the news lately due to shareholder votes on climate change or court rulings directing them to be aggressive in reducing their carbon footprint. Globally, regulations on emissions are becoming tighter. Surveys show that the young, millennial consumer is more willing to back products of companies that are environmentally conscious. With such social, political and financial tailwinds, companies are naturally gravitating to Green Frontier technologies.

This presents a fork-in-the-road for companies in fossil fuel industry. They have investments that continue to generate free cash flows which cannot be deployed back into the same industry. They can either return cash to shareholders or invest in new green technologies or companies. For companies wanting to head down to net zero, returning cash to shareholders is not a material option—their products and processes will continue to spew out emissions and hence going to net zero requires investment in technologies that reduce carbon from the atmosphere. Companies like the Dutch Ørsted are transitioning from an oil company to an offshore wind company with shareholders accepting lower returns.

Such companies, egged on by regulations and investors, can offer both venture capital for new technologies and muscle power for deploying technology quickly across the globe. An example of this is the Oil and Gas Climate Initiative’s $1-billion-plus climate investments fund with a portfolio of 19 investments across low-carbon technologies. The fund is supported by some of the largest oil and gas companies including Aramco, BP, Chevron, Exxon and Shell.

Carbon markets

As countries move towards net zero, they will hit binding constraints on the carbon that companies (or consumers) in such countries can emit. To keep commitments, countries will need to move to some version of cap-and-trade systems: certain units of emissions will be available within the country and if companies need to exceed that, they will need to buy ‘carbon credits’ from firms within or outside. This system has been working, especially in Europe, where prices have reached 50 euros per tonne of carbon.

To put this number in perspective, the total carbon-equivalent emissions in the world are about 50 billion tonnes a year. If each unit of carbon emission were to be valued at current prices, this amounts to $2.5 trillion a year. We do not set much store with this number as it is volatile and subject to many adjustments—the idea is to get a sense of magnitude here. As emission quotas come down, prices can rise further even as emissions come down. Such carbon markets can create significant resources for transfer between countries—making many projects viable in developing countries. Global agreements like the Kyoto Protocol need to be put in place to get this market moving.

The role of policy

Large funding requirements in India require support from policymakers to crowd-in private investment from all the above three sources. Policy innovation is required in (1) identifying technologies that work for India and nurturing these into viable businesses, (2) executing fair and just transition plans for impacted people and industries, and (3) enabling new instruments and sources of capital from the 3Cs above for financing to flow more efficiently.

As India moves to its aim of a cleaner, greener $5-trillion economy, a roadmap for attracting green finance needs to be put in place.

‘Room for India’s growth in UAE never stops, from investments to service sector’

Source: Market Shokers, 15 June 2021

UAE has emerged as India’s premier strategic partner in the Gulf. With bilateral trade at US$ 60 billion, the India-UAE relationship is special, as seen in the surge of UAE investments in India, or in the number of Indian startups setting up in the Gulf nation and in the hiring of IT professionals from India. The room for growth never stops, Rashed Al Habtoor, CEO & President of Al Habtoor Trading Enterprises, one of UAE’s biggest entrepreneurs told ET’s Dipanjan Roy Chaudhury.

The robust flow of bilateral investments and an annual bilateral trade of about US$ 60 billion ensures that the UAE is India’s third-largest trade partner. Do you think that there is still space to grow? Which measures need to be taken?
The room for growth never stops, we can still work on improving and strengthening our trade relations by taking care of factors such as increasing transparency of existing regulations. Besides, capacity building would strongly help in gaining trust and facilitate trade partners to work more effectively by reducing procedural obstacles, and by supporting them to comply with regulatory requirements for increased work efficiency.
The UAE, in the coming years, is expected to make more investments in key sectors of the Indian economy. In the food sector, for instance, the UAE has already confirmed US$ 7 billion worth of investment. Could you please name few other areas where India can attract investments from the UAE?
With the recent initiative, ‘Operation 300 Billion’ launched by Sheikh Mohammed which focuses on boosting the UAE’s industrial sector, I believe this is a great opportunity for Indian talent to showcase their professionalism in the industrial sectors in the UAE. With relation to this, the field of construction will be in need of skilled labor to achieve the goals of ‘Operation 300 Billion’.

Many Indian entrepreneurs and start-ups wanting to set up their base and expand to other markets have invested in Dubai. Do you think that Dubai is a good base for tech companies from India? Why?
Dubai is fast becoming the new Silicon Valley for many Indian start-ups and tech companies, which have paved their way into the UAE market by offering ground-breaking solutions to both government organizations and private companies. The growing ties between India and the UAE, has led to the surge in hiring of IT professionals from India, and I believe they are capable enough to change the economic and technical landscape of the UAE.

Al Habtoor Trading Enterprises commits to develop, expand and create new opportunities for your partners. Could you please name few areas that you are interested in cooperation with Indian companies?
One of my ventures specializes purely in providing excellent business setup services in the UAE to potential business people from around the world. We guide them through all legal and regulatory processes in order to help them set up their businesses smoothly, and my highly trained team also assists with selection of the right services from the licensing processes to a number of other related services with unique benefits that will surely aid in the seamless set up or relocation of an existing business into the UAE.

Do you think that it is the right time now to invest in real estate in Dubai? What are your expectations from the real estate market in Dubai this year?
I have seen a pent up demand in Dubai’s real estate market from last summer, with buyers from around the world actively looking forward to capitalize on record low prices. I believe there has never been a better time to take advantage of the real estate market in the UAE than currently. Dubai’s foundation has always been strong with a very attractive and excellent infrastructure along with world class education and healthcare facilities, which makes Dubai one of the most preferred places to live.

Last year, the UAE and India come closer and collaborated more than ever before, despite the pandemic. What do you think makes India-UAE relations so special?
The India-UAE relationship has truly strengthened during the pandemic like never before, as both the countries worked tirelessly to ensure that both residents and expatriates were not left stranded amidst the pandemic by facilitating travel arrangements between the two countries. Both countries had also initiated bilateral cooperation in sectors such as food security and healthcare, which I believe are two of the most important areas to focus during a pandemic.

EAM Jaishankar, FM Sitharaman to headline UK’s India Global Forum

Source: Business Standards, 15 June 2021

External Affairs Minister S Jaishankar and Finance Minister Nirmala Sitharaman were on Tuesday confirmed as the headline speakers at a global event that will lay out India’s vision for post-pandemic growth.

India Global Forum, organised from London as a hybrid event between June 29 and July 1, will bring together a range of worldwide experts, including World Health Organisation (WHO) Director-General Dr Tedros Adhanom Ghebreyesus, former New York Mayor Michael Bloomberg and former CIA Director General David H. Petraeus, to cover India’s role in vaccine and medicine manufacturing as well as cooperation in crucial areas of climate change and an equitable global economic recovery.

From India, other senior ministers set to address a host of sessions include Commerce & Industry Minister Piyush Goyal, Transport Minister Nitin Gadkari and Women & Textiles Minister Smriti Irani.

This year’s India Global Forum brings with it a sense of urgency and impatience about the radical actions needed now to shape a post-pandemic world, said Manoj Ladwa, CEO of India Inc. Group, organisers of the forum.

It’s where the big global issues of climate change, economic recovery and opportunity, digital transformation, and tackling new age imperialist and fundamentalist threats get debated, he said.

In line with its Future. Now. Radical Actions for the Post Pandemic Era theme, the sessions of the forum will cover Climate Action; Digital Future; Global Business; Economic Recovery; Health & HealthTech; Securing Supply Chains; and Global Leadership.

From views on how the post-pandemic build back of the global economy can be used to accelerate the transition to a better and safer world, to so-called Covidonomics of navigating huge new debts, unemployment and ongoing healthcare risk, the event is being pegged as the first chance for such a high-level worldwide forum as India gradually emerges from a devastating second wave of the COVID-19 pandemic.

Modi to address global tech event VivaTech

Source: The Hindu Businessline, 15 June 2021

French President Emmanuel Macron, Spanish PM Pedro Sánchez will also address event
Prime Minister Narendra Modi will deliver the keynote address at the fifth edition of VivaTech, one of the largest digital and start-up events held annually in Paris, on Wednesday.

“The Prime Minister has been invited as a Guest of Honour to deliver the keynote address at VivaTech 2021,” per an official release issued by the Ministry of External Affairs (MEA). The event will be held on June 16-19.

Other prominent speakers in the event include French President Emmanuel Macron, Spanish Prime Minister Pedro Sánchez, and Ministers and MPs from various European countries.

Representatives from top corporates such as Apple CEO Tim Cook, Facebook CEO Mark Zuckerberg, and Microsoft President Brad Smith are also scheduled to attend the event, the release added.

VivaTech, which started in 2016, is jointly organised by advertising & marketing conglomerate Publicis Groupe and a leading French media group Les Echos. It brings together stakeholders in technology innovation and the start-up ecosystem and includes exhibitions, awards, panel discussions, and start-up contests.

Chinese firms can now bid for public projects

Source: Financial Express, 16 June 2021

The government has allowed domestic companies to partner with Chinese firms by way of technology transfer agreements to bid for public projects. The development is a major climbdown in the government’s stand with regard to Chinese firms since it barred them in every possible manner to do business in the country in the aftermath of escalated border tensions between the two nations last year.

In July 2020, as a fallout of the border tensions, the government had amended its general financial rules (GFRs), stating that bidders from any country sharing a land border with India need to first register with a “competent authority” to be eligible for government contracts. However, it had made an exception for bidders from countries where India had extended a line of credit or was engaged in development projects. This way countries like Nepal, Bhutan and Bangladesh were automatically exempted and it was clear that the order was aimed at firms belonging to China, as those based in Pakistan don’t participate in government contracts.

However, an office memorandum issued by the procurement policy division of the department of expenditure, ministry of finance, earlier this month, has stated, “there is no bar for the bidders to have ToT (transfer of technology) arrangement with the entities from a country sharing land border with India. Hence, such bidders are not required to be registered with the competent authority”.

Official sources said that the relaxation was required as lot of Indian firms bidding for government and public sector projects had some technology sharing pacts with Chinese firms, especially in the infrastructure sectors. As a result, the concerned administrative ministries had sought clarification from the finance ministry whether such bidders need to be allowed to participate in tenders or disqualified.

Sources said that since technology transfer is done on payment of fee by the Indian companies to their Chinese counterparts and the executing firms are Indian, such concessions can be made.

Industry sources said that the relaxation now provides some scope to the Chinese firms to do business in India. Since beginning last year, the government had otherwise taken a stringent approach towards Chinese firms by banning all Chinese apps and disallowing telecom gear manufacturers like Huawei and ZTE to build networks for either state-owned BSNL or even private sector telecom operators.

In fact, the government had adopted such a hard stance that last year it had even withheld import consignments, which mainly comprised industrial components, from China at ports apprehending malware. It was only after the domestic industry urged the government to clear their consignments as it was hurting their production that the custom authorities started clearing the consignments.

Railways plans Rs 56,955 cr spend in 5 years for signalling, telecom systems

Financial Express, 16 June 2021

The Cabinet had announced earlier this month, on June 9, the allocation of 5 MHz spectrum in 700 MHz band for the Railways which will be used for providing LTE based mobile train radio communication and advanced radio network on its route.

Indian Railways is planning an investment of Rs 56,955 crore over the next five years in modernisation of signalling and telecommunication systems to augment the safety and capacity of the national transporter.

The modernisation will be in the areas of Long Term Evolution (LTE), Optical Fibre System, Train Collision Avoidance System (TCAS), Automatic Block Signalling (ABS), Electronic Interlocking (EI) and Centralised Traffic Control. The Cabinet had announced earlier this month, on June 9, the allocation of 5 MHz spectrum in 700 MHz band for the Railways which will be used for providing LTE based mobile train radio communication and advanced radio network on its route.

The Cabinet had also approved the TCAS to make rail travel safer and faster, envisaging a spend of Rs 25,000 crore for these two projects. With an expanded modernisation plan, the cost of the projects is estimated to be Rs 56,955 crore.

The roadmap on providing more modern signalling solutions to enhance the safety and all-round operational efficiency of Railways was given out at a press conference addressed by Sanjeev Mittal, member (infrastructure) of Railway Board and other members of the Board — Aruna Singh, additional member, (telecommunications) and Rahul Agarwal, additional member (signal).

With more signal bandwidth now available to support the objective of improving safety in train operations and generating additional line capacity, the TCAS has been approved for 37,300 route km, covering important routes in the 1st phase. The TCAS is an automatic train protection system which works as an aid to loco pilot to prevent human error.

The Railways plan to boost the capacity to run more trains on existing network with ABS, a solution designed to enhance line capacity and run more trains on existing high density routes. While ABS has already been provided on 3,447 km, the Railways plan to roll out automatic signalling on around 15,000 Rkm of high density and freight intensive routes in mission mode.

Also, in the pipeline is a boost to the EI systems which are being adopted on a large scale to increase safety and flexibility in train operation and are currently in use at 2,221 stations. The Railways plan to provide further 1,550 EIs in the next 3 years to enhance safety and efficiency of train operations.

The five-year investment will also include covering more routes with OFC based system. Already, 92% route of the Railways is covered by the OFC which is used for the national transporter’s internal communication. While Wi-Fi facility has been extended to 6,002 stations, the 101 balance feasible stations, of which 70% are in rural areas, will also be covered.

The CCTV system to improve security has been provided at 801 stations and balance are also planned.

Trade recovery: Exports surge 69% in May on improved demand

Financial Express 16 June 2021

Trade recovery: Exports surge 69% in May on improved demand
By: FE Bureau | June 16, 2021 5:15 AM

Merchandise exports surged over 69% in May from a year before to $32.3 billion, driven by a favourable base and improved demand from key markets. Despite the second pandemic wave, exports were more than 8% higher than even the May 2019 (pre-pandemic) level, showed the provisional data released by the commerce ministry on Tuesday.

Having witnessed an impressive rate of expansion last fiscal in the wake of the Covid-19 outbreak, drug and pharmaceutical exports dropped by 5.4% in May to $1.9 billion, thanks to decreasing Covid cases in the US and the EU.

Goods exports have now crossed the pre-Covid (same months in 2019) level for three straight months, in what appears to be a strengthening trade recovery. The provisional estimate of export growth for May is higher than a preliminary one of 67% reported earlier.

Of course, export growth was low even before the pandemic – outbound shipments rose about 9% in 2018-19 but again shrank by 5% in 2019-20. So only a sustained uptick over the next 2-3 years would help recapture the lost heights.

Still, given the unprecedented crisis and localised lockdowns in key industrial states, the export performance in May 2021 was promising.

Imports, too, grew close to 74% to $38.6 billion in May, as the base remained conducive and domestic demand recorded a fragile recovery. However, the imports were still down by over 17% from the May 2019 level. Petroleum imports surged by 179% to $9.5 billion, reflecting rising crude oil prices, while gold imports spiked by 790% to about $679 million in May, driven primarily by a low base. Vegetable oil imports jumped 149% to $1.4 billion.

The sharp growth in trade in recent months, albeit supported by favourable base effects (exports were down by 36% and imports by almost 51% in May 2020), also suggests the supply side is able to respond better to a pick-up in demand from key markets. Of course, base effect will continue to aid trade growth in the coming months as well.

Trade deficit narrowed sharply to an eight-month low of $6.3 billion in May, against $15.1 billion in the previous month.

Importantly, core exports (excluding petroleum and gems and jewellery) climbed up by close to 47% in May from a year before, lower than the growth in overall merchandise shipments. Such exports recorded an almost 12% rise from the May 2019 level. Core imports rose 52% year-on-year but dropped by 3% from May 2019.

Analysts have already said sustenance of high exports (in absolute terms) in the coming months will signal a meaningful turn-around, as they cite the roller-coaster ride of exports in the wake of the pandemic last fiscal.

However, commerce secretary Anup Wadhawan last month exuded confidence that the current wave of the Covid-19 pandemic was unlikely to alter the export trajectory in the coming months and that the country’s external trade would continue to perform well.

Major commodities or groups (with exports in excess of $500 million) that have recorded high year-on-year growth in May included petroleum products (227%), gems & jewellery (179%), cotton yarn/fabrics/made-ups, handloom products etc. (138%), garments (114%), electronics (91%) and engineering goods (53%).

India, Indonesia resolve to strengthen comprehensive strategic partnership

Source: Economic Times, June 10, 2021

India and Indonesia on Thursday vowed to further strengthen their comprehensive strategic partnership while reviewing the bilateral ties in a wide range of areas.

The review was carried out at a virtual meeting between Minister of State for External Affairs V Muraleedharan and Indonesia’s Vice Minister of Foreign Affairs Mahendra Siregar.

“During the meeting, both leaders reviewed India-Indonesia bilateral relationship, spanning across a wide range of areas,” the Ministry of External Affairs said.

It said the two ministers also discussed cooperation on regional issues and in multilateral fora.

“Both leaders expressed commitment to further strengthen India-Indonesia comprehensive strategic partnership,” the MEA said in a statement.

It said Muraleedharan also thanked the Indonesian government for sending relief materials to India for fighting the COVID-19 pandemic.

Defence and security cooperation between India and Indonesia has been on an upward trajectory in the last few years, particularly in the maritime domain.

Indonesia is an important country of the ASEAN (Association of Southeast Asian Nations).

India’s wind power sector wants rival solar to help drive growth

Source: Economic Times, June 10, 2021

India’s struggling wind power industry is looking to its clean energy rival for help emerging from a pandemic-induced slump.

About half of the 20 gigawatts of wind power the nation is expected to add through 2025 will come in the form of hybrid projects that combine turbines with solar panels, according to a new report by the Global Wind Energy Council and MEC Intelligence. An existing pipeline of about 10.3 gigawatts of projects will make up the rest.

The outlook is brighter than the recent past, which saw the nation install less than 4 gigawatts of wind power in 2019 and 2020 combined. India’s wind industry, which has about 40 gigawatts of capacity now, has been struggling for the past few years due to land challenges, which hindered projects as well transmission lines.

The report derives its optimism from a potential rise in energy consumption as the economy revives and India’s embrace of clean energy to meet its climate commitments. The world’s third-biggest emitter of greenhouse gases plans to expand its renewable power capacity nearly five-fold to 450 gigawatts by the end of this decade, shedding its dependence on coal, which helps produce close to 70% of its electricity.

Central government tenders will account for 90% of the new additions, with corporations and provinces making up the remainder, the report said.

“The task of the leader is to get their people from where they are to where they have not been.” – Henry Kissinger

Healthy Growth: Organic farm exports jump 51% in FY21

Source: Financial Express, June 11, 2021

The products were supplied to 58 destinations, mainly the US, the EU, Canada, the UK, Australia, Switzerland, Israel and South Korea.

Overseas demand for India’s organic farm products shot up in the pandemic year and exports of such items surged 51% on year in FY21, beating Covid-induced hiccups in the supply chain.

Outbound shipments of organic products hit $1,040 million last fiscal, compared with $689 million a year before, aiding a rise in the overall agricultural exports, commerce secretary Anup Wadhawan said on Thursday.

Farm exports rose over 17% last fiscal to $41.25 billion when total merchandise shipments shrank by about 7% to almost $291 billion.

Even in volume term, exports of organic products grew as much as 39% to 8,88,179 tonnes last fiscal, against 638,998 tonnes in FY20, suggesting robust growth in demand.

The key organic products that were shipped out include oil cake and meals, oil seeds, cereals, millets, spices and condiments, tea, medicinal plant products, dry fruits, sugar, pulses and coffee.

The products were supplied to 58 destinations, mainly the US, the EU, Canada, the UK, Australia, Switzerland, Israel and South Korea.

Organic products are currently exported from India only if they are produced, processed, packed and labelled as per the stipulations of the National Programme for Organic Production under the state-run APEDA.

As for the overall farm exports, the country recorded impressive growth, despite the logistical and operational challenges posed by the pandemic, as demand for staples jumped. Exports of agriculture and allied products (including marine and plantation products) rose to $41.25 billion in FY21 from $35.16 billion a year before, Wadhawan said. Such exports had remained stagnant for two years — $38.43 billion in FY18 and $38.74 billion in FY19 – before declining in FY20.

Bumper harvest of certain crops, especially grains, sustained efforts by exporters in challenging times, attractive prices abroad and push by the government through various initiatives — including a farm export policy, setting up of clusters and easier compliance—boosted exports.

Wadhawan said exports of non-basmati rice jumped 136% to $4,794.54 million; wheat by 774% to $549 million; and other cereals (millets, maize and other coarse gains) by 238% to $694 million.

Other farm commodities that posted substantial increase in exports were sugar (42% to $2,790 million), raw cotton (79% to $1,897 million), oil meals (90% to $1,575 million), fresh vegetables (11% to 721 million) and vegetable oils (254% to $603 million). The US remained the largest market for Indian farm products, followed by China, Bangladesh, the UAE and Vietnam.