NEW DELHI: It’s not just India’s bullet train project, Japan is also set to partner the country’s road-building efforts through the establishment of an infrastructure financing company in which both nations will have an equal stake.
The proposal will be discussed with Japanese Prime Minister Shinzo Abe during his upcoming India visit, an official said, adding that the finance company will primarily provide soft loans for road projects with a credit target of Rs 2 lakh crore.
It was reported earlier this week that Japan will most likely be picked as partner for India’s bullet train project between Mumbai and Ahmedabad.
The Japan Bank for International Cooperation (JBIC) will hold 50% equity in the infrastructure funding firm on behalf of the Japanese government and the rest will be held by an Indian state-owned entity, said the official.
It is envisaged that this entity will give long-term loans, of 30-40 years, for infrastructure projects in India at an interest rate of 0.5%.
“The cost of raising a loan would not be more than 5%, including hedging, which is expected to be 4-4.5%,” the official said. The joint venture will have two Indians and two Japanese members on its board with the chairman being an Indian.
“These measures to raise costeffective international capital are very desirable and useful steps to achieve the ambitious targets as well as reduce dependence on the exchequer,” said Vinayak Chatterjee, chairman of advisory Feedback Infra.
India aims to increase the length of its highways by 50,000 km in the next five years, from 96,000 km now.
The plan will require an investment of Rs 5 lakh crore. In addition to this, the country also plans to construct 10 greenfield expressways spanning 16,000 km. More than 22,000 km of existing highways are being upgraded.
JBIC is one of the bigger providers of funding for large infrastructure projects and has already made significant commitments to several power projects in India.
It recently signed an agreement to help fund construction of the new Andhra Pradesh capital of Amaravati. Japan has been one of the biggest funders of India’s infrastructure. JBIC holds equity in the Delhi-Mumbai Industrial Corridor project.
The Japan International Cooperation Agency (JICA) funded the Delhi Metro Rail Corp. project and is also providing loans for the western dedicated freight corridor project of Indian Railways as part of the special terms of economic partnership or STEP. India will also be getting Japanese funding for the Mumbai-Ahmedabad, highspeed train corridor project.
A JBIC survey of 1,000 companies for the Japanese manufacturing sector in July 2014 said India was ranked as a top investment destination, followed by Indonesia and China.