AFD and India

Š John & Mel Kots

AFD and India

Partners for a green and inclusive growth

However, the energy sources used In India (mainly coal and oil) means that this catching up process is likely to heavily affect the climate, as the country already ranks as the world’s third largest greenhouse gas emitter. The focus of the 2008 National Action Plan on Climate Change (NAPCC) and the aim of the cooperation between AFD and the Indian Government are to reconcile these two targets (scale up infrastructure and control greenhouse gas emissions).

© AFD – Jean-Pierre Barral

AFD’S OPERATIONS IN INDIA ARE SET

BY A MoU SIGNED BETWEEN THE INDIAN MINISTRY OF FINANCE AND AFD

INDIA, AN EMERGING COUNTRY SET TO BECOME THE WORLD’S MOST POPULOUS COUNTRY BY 2020

India and France are seeking to build closer relations between the two countries. In 2008, this was expressed through a joint political decision to enhance the co-operation and join forces to address some of the main global challenges.

In this context, AFD was authorized to operate in India, with the mandate to contribute to the sustainable management of global public goods (GPGs), including climate change, by providing financial and technical assistance to India’s central government, regional States, municipalities and public institutions.

AFD has been entrusted with a strategic mandate tailored to the Indian Government’s priorities. It is based on three main areas of cooperation:

India is roughly six times the size of France (3 million km2) with a population of over 1.2 billion people. It is currently the world’s second most populous country, but the UN predicts that it will overtake China by 2020.

he development of renewable energies and the T dissemination of best practices for energy efficiency in order to guarantee sustainable growth,

This subcontinent has around 40 cities with over a million inhabitants, yet 70% of the population lives in rural areas. Total GNP stands at USD 4,060 billion (twice France’s GNP), nonetheless 76% of the population lives on less than $2 a day.

The country is home to various regional States; some with population comparable to Brazil, Italy and Mexico, but per capita income similar to Benin, Eritrea and Haiti for the poorest.

he protection of the environment and preservation of the T country’s biodiversity.

Although India shares common traits with other so-called emerging countries, it differs substantially when it comes to poverty levels, economic structure and demography.

The main implication of this gap between population dynamics and level of development is that the need for economic growth remains high and poses a major challenge.

This is particularly the case for the infrastructure sector where the needs are enormous. In the power sector, the structurally inadequate electricity supply is a major impediment to growth and to the competitiveness of India’s economy. The situation in the transport sector also raises concerns as economic losses caused by congestion and the poor quality of roads amount to almost 0.6% of GDP. The Indian Government has set out to close this gap by adopting an ambitious investment program of approximately USD 1,000 billion for the period 2012-2017.

he development of low-carbon urban infrastructure, T particularly in the transport and water sectors, in order to gear up for demographic transition in urban areas,

Breakdown of project portfolio as a percentage of allocated funds

18 Energy efficiency and renewable energies

14 68

Biodiversity preservation Urban infrastructure

SOURCE: AFD

© Lingaraj GJ

The success of these first projects should lead to the development of this instrument for further operations in India.

For example, in late 2011, AFD allocated a €150m loan to IDBI Bank Ltd, a key player in financing infrastructure, renewable energy and energy efficiency projects. © AFD – Jean-Pierre Barral

IMPROVING ENERGY EFFICIENCY IN INDIAN MSMEs (€50M CREDIT LINE TO SIDBI) Indian MSMEs (Micro, Small and Medium Enterprises) are a major driver of the country’s economy. They have a direct impact on employment, industrial production, exports and energy consumption in the country. Yet they benefit from low levels of bank loans to support their investments. AFD is working alongside the public bank SIDBI (Small Industries Development Bank of India) to promote access to loans for MSMEs making energy responsible investments.

In 2009, AFD allocated €120m of bank loans to two local financial institutions for this purpose. These loans were earmarked to finance investments in the renewable energy and energy efficiency sector. In the first year alone, these environmental credit lines contributed to the implementation of some 650 projects in a wide range of sectors. The GHG reductions from these projects are estimated at over 900,000 teq CO2 every year.

PROMOTING RENEWABLE ENERGY DEVELOPMENT IN INDIA (€70M CREDIT LINE TO IREDA) AFD promotes a lower-carbon approach to economic development and contributes to a number of public policies for this purpose. In view of the scale of the challenge of this national objective, AFD has set out to work alongside the Indian Government and help it achieve its energy policy targets.

It is doing so by providing financial and technical support to IREDA, the Indian Renewable Energy Development Agency.

INVESTING IN LOW-CARBON GROWTH India’s GDP is experiencing strong growth, which means that energy demand is on a strong upward trend. The country’s resources have not been able to meet this demand for a long time now. The type of energy sources used, mainly fossil fuels (coal accounts for 68.5% of India’s power generation), has a major impact on the environment, especially on the climate.

India has become the world’s 3rd largest greenhouse gas emitter (4th if the European Union is taken as a single “bloc”) and has seen a sharp rise in its emissions (+ 6% annually). India also suffers from a major infrastructure deficit (ports, airports, roads, supply chains, telecoms, etc.), which dampens growth by several points every year.

Environmental finance:

a tool to make India’s financial sector the engine for sustainable growth AFD is supporting several Indian financial institutions in an approach to promote environmentally responsible investments.

By supporting sustainable growth provided via “green” credit lines, AFD contributes to achieving India’s priority objectives for energy efficiency, renewable energies and infrastructure in line with the NAPCC.

PARTICIPATING IN THE VOLUNTARY CARBON CREDIT MARKET

BY FINANCING BIOGAS UNITS AFD has participated in the voluntary carbon credit market by allocating a €500,000 concessional loan to the Good Planet Foundation (founded by Yann Arthus-Bertrand), which works in partnership with SKG Sangha, an Indian NGO well-known for installing biogas units in rural areas.

Thanks to this project, 1,500 biogas units have been installed in villages in the Bangalore region. This has given poor rural families access to sustainable, low-carbon energy and has, at the same time, contributed to combating deforestation and therefore conserving biodiversity and mitigating climate change.

It has also improved living conditions for households in rural India (no more wood chores and less domestic pollution) and given them additional income (sale of natural fertilizer). There is a plan to reproduce and upscale this project.

IMPROVING THE DRINKING WATER NETWORK IN THE CITY OF JODHPUR The State of Rajasthan is experiencing increasing pressure on its water, energy and financial resources due to a whole range of factors (climate change, population growth, extension of irrigated areas, urban growth and increase in energy prices). This has prompted the Government of Rajasthan to seek support on ways to optimize the public service and make it more effective, notably through the management of the City of Jodhpur’s drinking water network to make it more energy and cost efficient. AFD has approved a €71.1m loan to the central government, which will reallocate it to the State Government of Rajasthan for the re organization of Jodhpur’s urban water system.

BIODIVERSITY CONSERVATION India is particularly rich in biodiversity. Because of its immense surface area extending over different latitudes and topography, India is home to a wide and extraordinary diversity of flora and fauna. It holds 7.3% of the world’s plant species and 10% of its animal species. Over 33% of the plant species are endemic to India, where 26 “endemic centers” have been identified. Areas of high biodiversity include the Himalayas (in the North and Extreme East of the country), the North West (Thar Desert in Rajasthan and Gujarat), the Western Ghats (hills and lowlands to the west of Deccan) and the Andaman and Nicobar Islands. India has two of the eight most important remarkable biodiversity hotspots in the world: the Western Ghats and Eastern Himalayas.

DEVELOPING THE INFRASTRUCTURE NETWORK FOR A SUSTAINABLE URBAN FUTURE The phenomenon of increasing urbanization in India in recent years stems from both the massive rural exodus and high population growth. Over the next 20-25 years, the urbanization rate is expected to rise from 30% to 40-50%. Over 60 cities will have more than 1 million inhabitants and will account for roughly 70% of India’s GDP. India’s cities suffer from a lack of infrastructure which limits their settlement capacity. A major challenge for economic growth and poverty reduction is to improve mobility, establish an environmentally-friendly development of the water and sanitation networks and give more equal access to basic services. AFD’s activities are in line with the priorities of the Indian Government and aim to support this process in Indian cities, while combating the negative externalities of urban concentration.

The important and rapid population and economic growth, linked with the difficulties to implement central and state level environmental legislations, apply tremendous pressure and threaten India’s biodiversity.

FOREST CONSERVATION AND BIODIVERSITY IN ASSAM India’s vast forest resources, along with the rich biodiversity they host, are today under threat. AFD has taken action by supporting the State of Assam in North East India, which is promoting a sustainable management of its forest combining sound exploitation and preservation.

AFD has approved a €54m loan to the Indian Government for this purpose. The loan is financing activities to reforest damaged forest areas, define participative forest management plans involving local communities more and train State administrative staff to raise their awareness of the importance of preserving the natural capital. The ultimate aim of this project is to restore forest ecosystems in partnership with communities who rely on them for their livelihood. This will improve the standard of living of these communities and contribute to the sustainable preservation and use of forest resources. An international technical assistance, funded through AFD’s own resources, is provided in order to support the project launch.

© Yathin

© AFD – Jean-Pierre Barral

Right from its independence, India adopted a sound legislative framework and proactive policies to ensure the preservation of its biodiversity. This national legislative framework has been completed by the ratification of a number of international conventions including the UN Convention on Biodiversity Conservation (CBD).

TECHNICAL ASSISTANCE FOR TARGETED SKILLS TRANSFERS A number of French stakeholders working in India offer technologies and skills that could contribute to the preservation of global public goods. Many partnerships have been established between French and Indian companies, as well as with representatives of decentralized cooperation, French and Indian universities, research institutes and civil society organizations.

AFD mobilizes its own funds to finance technical assistance contracts on an ad hoc basis in addition to the loans it allocates in India. These contracts aim to strengthen the skills and instruments made available to beneficiaries and, generally, to develop activities with the aim to ensure a more effective integration of the preservation of global public goods.

AFD has close ties with the Bureau of Energy Efficiency (BEE) in India, where a French technical assistant (TA), an energy expert from ADEME (French Environment and Energy Management Agency), has been seconded to BEE since 2008. The TA provides BEE with skills on the topic of energy efficiency in buildings and enterprises, particularly small enterprises.

BEE, AFD and ADEME have established a tripartite co-operation to support BEE in three sectors: 1. Energy efficiency in MSMEs; 2. Energy efficiency in the building sector (residential and commercial); 3. Energy Conservation Action Plans at the state level (SECAP).

Two studies relating to the MSMEs and the Building sectors have been launched in 2011.

© a4gpa

FRENCH EXPERTISE AT THE SERVICE OF THE BUREAU OF ENERGY EFFICIENCY

PROPARCO IN INDIA PROPARCO was founded in 1977 and is AFD’s private sector financing arm. Its mission is to support projects that have a strong impact on development and the fight against climate change. PROPARCO’s strategy is to be a long-term investor.

It offers a full range of financial instruments – loans, equity investments and guarantees.

In India, PROPARCO focuses its investments on the development of renewable energies (wind, geothermal, solar, hydro and biomass) and energy efficiency. It also finances the health, education and microfinance sectors as well as the agrifood chain. In just a few years, India has become a leading country for its activities with some €200m of investments at the end of 2011.

© Leadenhall

AFD, the Agence Française de Développement, is a public development finance institution that has worked to fight poverty and support economic growth in developing countries and the French Overseas Provinces for 70 years. AFD executes the French government’s development aid policies.

Through offices in more than fifty countries and nine French Overseas Provinces, AFD provides financing and support for projects that improve people’s living conditions, promote economic growth and protect the planet: schooling, maternal healthcare, help for farmers and small business owners, clean water supply, tropical forest preservation, and fighting climate change, among other concerns.

In 2010, AFD approved more than €6.8 billion for financing aid activities in developing countries and the French Overseas Provinces. The funds will help 13 million children go to school, improve drinking water access for 33 million people and provide €428 million in microloans benefiting more than 700,000 people. Energy efficiency projects financed by AFD in 2010 will save nearly 5 million tons of carbon dioxide emissions annually. www.afd.fr

AGENCE FRANçAISE DE DéVELOPPEMENT (AFD)

5 rue Roland Barthes 75598 Paris Cedex 12 – France Tél. : +33 1 53 44 31 31 Fax : +33 1 44 87 99 39 www.afd.fr agence de new delhi

1/A Janpath New Delhi 110 001, Inde Tél. : +91 11 23 79 37 47 Fax : +91 11 23 79 37 38 afdnewdelhi@afd.fr

www.proparco.fr

FFEM

www.ffem.fr

FFEM is a bilateral public facility set up by the French Government in 1994 following the Rio Summit. It aims at promoting global environmental protection via sustainable development projects in developing or transition countries. The French Global Environment Facility supports physical projects in recipient countries. Its operations are learning-based and support experimental, innovative or exemplary approaches.

This brochure respects the environment and was printed using vegetal ink on PEFC™ certified paper (sustainable forest management).

Creation: Planet 7 – March 2012

PROPARCO, AFD’s subsidiary dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote sustainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment.