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The tie-up is in the form of a "non-exclusive Memorandum of Understanding with Germany-headquartered KfW Bankengruppe to jointly assist domestic companies undertaking Clean Development Mechanism (CDM) projects which reduce carbon emissions in the environment".

The two financial intermediaries will also help companies realize the value of the carbon credits, arising from the implementation of CDM, by selling them overseas.

IDBI is currently working on some CDM projects in the textiles, steel, power, paper and sugar sectors.

Assisting SMEs

Further, IDBI is seeking to assist small and medium enterprises (SMEs) in implementing CDM projects in a big way. The bank plans to pool CERs generated by SMEs and sell them globally in market lots of 50,000 to 100,000 CER units. The move to aggregate CERs is significant as international buyers typically require larger volume of CERs.

The MoU was signed by Mr. Pradip Roy, Executive Director, IDBI, and Mr. Christian Haas, Director KfW Office, New Delhi. Mr. V. P. Shetty, CMD, IDBI, stated, "The IDBI-KfW combine will not only assist Indian companies, both large and small, which want to undertake CDM projects, but also help boost their bottom line by selling the resultant CERs forward in the global markets. While the sale of CERs will give companies additional revenue, IDBI stands to gain in the form of additional fee income."

Mr. Haas added, "As a buyer of carbon credits, KfW acts for the benefit of European companies. By cooperating with IDBI, KfW ensures access of its European partners to the buoyant CDM market of India."

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* Contributed by: -
Prateek Mathur & Pinky Singh,
MBA (2nd Year),
Faculty of Management Studies (FMS),
University of Delhi, Delhi.
Article posted on March 7, 2009.