Financial Daily from THE HINDU group of publications
Monday, Jun 17, 2002
Industry & Economy - Infrastructure
Government - Overseas Borrowings
Infrastructure projects: Talks soon with ADB, World Bank for $2-b loan
NEW DELHI, June 16
THE Government is set to commence talks with the World Bank and the Asian Development Bank (ADB) to raise loans aggregating over $1 billion each for funding infrastructure projects, according to senior officials.
During 2001-02, the Government had raised $1.5 billion from both these multilateral agencies to fund the national highway projects. This time around, a substantial part of the proposed loan could well be channelised for funding the last mile projects of the Indian Railways and also for other ventures of the Railways.
Part of the funds could be used for setting up safety systems for the Railways besides projects in other sectors, officials said. Both World Bank and ADB have been sounded out for funding the infrastructure projects.
Last week, at a meeting convened by the Finance Minister, Mr Yashwant Sinha, it was decided that banks and financial institutions would set up Special Purpose Vehicles (SPVs) to help fund infrastructure projects. Finance Ministry officials said that if required the Government would also contribute to the capital of some of the proposed SPVs.
Although the Finance Minister had announced the setting up of an Infrastructure Fund with a corpus of Rs 1,000 crore in this year's Budget, the Government was willing to expand the size of the corpus after obtaining Parliamentary approval, officials said. However, the substantial part of the funding requirements for various infrastructure projects in India would have to be accessed from overseas entities, particularly multilateral agencies given the constraints on obtaining long-term funds in India.
Both World Bank and ADB have indicated they would be willing to step up the level of assistance for India. India is one of the largest borrowers in the case of both ADB and World Bank.
Government officials said that given the long pay back period for infrastructure projects, it makes sense to raise funds from these agencies as the loans have repayment period of well over 20 years.
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