ADB extends $574 million in loans to India
16 November 2018
Government of India and the Asian Development Bank (ADB) signed three loan agreements totalling $574 million to support various infrastructure projects in the country.
These include a $300 million loan to support India Infrastructure Finance Company Limited (IIFCL), a $105 million loan to support hydropower transmission project in Himachal Pradesh and a $169 million loan to provide water and sanitation services in Tamil Nadu.
The $300 million loan to support lending by India Infrastructure Finance Company Limited (IIFCL), will enhance availability of long-term finance for PPP projects, improve operational capacity of IIFCL, and expand the portfolio of infrastructure financing instruments available to IIFCL.
The ADB funding is expected to help at least 13 sub-projects through IIFCL, involving roads and renewable power generation, under the last tranche.
The project supports the renewed effort of the Government of India in accelerating infrastructure growth through increased private sector investment. The project is relevant and responsive to the constraints to bank based infrastructure financing, fiscal space creation, and repercussions on GDP growth.
The $300 million ADB loan is expected to help catalyze the financial closing of $2.4 billion in investments. In addition, the attached technical assistance will support IIFCL capacity development and will focus on IIFCL’s financial management and social and environmental safeguards.
The $105 million loan, the third tranche of a $350 million multi-tranche financing facility to finance the transmission system upgrades in Himachal Pradesh,will help increase the supply of hydropower to the state and the national grid.
The loan will have a 25-year term, including a grace period of 5 years, an annual interest rate determined in accordance with ADB’s lending facility based on the London interbank offered rate (LIBOR), and a commitment charge of 0.15 per cent per year.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 67 members—48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing.
ADB also signed an agreement with the Government of India under which it would extend $169 million to India as the first tranche of a $500 million multi-tranche financing to develop climate-resilient water supply, sewerage, and drainage infrastructure in at least 10 cities in Tamil Nadu.
Though Tamil Nadu is the most urbanised of India’s large States, urban service levels remain low, with less than half of households served by piped water, only 42 per cent of households are covered by a sewerage network, with 43 per cent of sewage disposed directly into waterways untreated.
Around 4 million people will benefit from piped water and sewerage connections and improved drainage. The program will boost institutional capacity, public awareness, and urban governance as part of a comprehensive approach for developing livable cities.