ISLAMABAD: The Ministry of Planning, Development and Special Initiatives (MPD&SI) is tailoring a plan to launch Green Sukuk worth Rs 20 billion in December 2024, aimed at arranging funds for different projects, well-informed sources told Business Recorder.
The format for the Sukuk would have Economic Internal Rate of Return (EIRR), Financial Internal Rate of Return (FIRR), Foreign Exchange Component (FEC), local component, total duration of project, inception date of the project, remaining duration of the project, outstanding funding requirement and planned payment disbursement schedule. The initial financing target for Sukuk is set at Rs 20 billion for the first year with potential increases in the second auction or through donor financing.
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The entire plan was discussed at a recent meeting presided over by the Member (FS&CC)) Planning Commission, Nadia Rehman, who introduced the draft criterion for water, land transport and energy sectors and template for PSDP projects and emphasized the importance of adhering to timely quarterly fund releases to ensure the successful completion of projects.
She stressed that Ministry of Finance would follow quarterly release schedule to guarantee the availability of funds. Additionally, interest rates could be reassessed after the first six months of the financial year in which the Sukuk is issued. The Sukuk could have a term ranging from one to five years or be divided in two auctions, contingent on the project’s performance during the first year.
The chair directed the technical sections to complete the template with as much detail as possible in collaboration with the sponsoring agencies and it alignment with the PC-1 forms. She reiterated the need to finalize an indicative list of potential projects. From this list, one or pool of projects would be selected for Sukuk issuance, with final recommendations made to the Ministry of Finance in consultation with the sponsoring agencies.
During the discussion on land and transport criteria for Sukuk, the chair emphasized potential sub-projects related to private and light commercial Electric Vehicles (EVs) such as EV manufacturing, bank leasing for EVs and EV tax fleets. She asked the Chief Transport about any projects that could involve the private sector in manufacturing or assembling EV fleet or buses under the existing EV Policy.
The chair also enquired about the economic viability of the recently approved Karachi Metro Bus Project. She underscored the need to establish infrastructure to support the operation of EV buses. Furthermore, if the government intends to monetize carbon credits, launch green bonds, or create green corridors, scaling up infrastructure is essential. To develop this infrastructure, the chair suggested that funds could be raised through Green Sukuk.
During discussions regarding energy sector projects, the chair highlighted the potential of securing green Sukuk for the manufacturing and distribution of solar panels and invertors, which would support local industries and help foreign exchange. She noted that, according to standard guidelines, projects should ideally commence within 36 months.
She was of the view that climate adaptation and resilience projects are also eligible for Green Sukuk, stressing the importance of developing clear criteria for selecting suitable partners to ensure alignment with Green Sukuk requirements.
Zulfiqar Gul Memon clarified that the Transport and Communication section does not handle matters related to energy efficiency or the economic and financial viability of green, transport system such as buses. He further informed the participants that during a recent CDWP meeting, the Chief Economic Appraisal pointed out that the Green Bus project in Karachi is not economically viable.
The Chief Power, Arshad Khan responded that for EV-related infrastructure it is essential to involve the National Energy Efficiency and Conservation Authority (NEECA) and the Private Power & Infrastructure Board (PPIB) under the Power Division, as they are working with Nepra on EV regulations.
Copyright Business Recorder, 2024
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