Multilateral lending agency Asian Development Bank today said it will provide up to $700 million (around Rs 3,360 crore) loan to India for accelerating infrastructure projects through public-private partnership initiatives.
"The Asian Development Bank will provide India up to 700 million dollar in loans to accelerate its roll-out of infrastructure projects through public-private partnership initiatives," the bank said in a release.
The ADB board on Tuesday approved the multi-tranche loan for the Second India Infrastructure Project Financing Facility.
"The loan will be released over five years to the state-owned India Infrastructure Finance Company Ltd. (IIFCL), and is a follow-on of the first-stage facility of 500 million dollar, approved in 2007," ADB said.
The IIFCL, established in 1996 to promote PPPs, will use the facility to support investments in a broad range of PPP infrastructure projects.
As of August 2009, IIFCL had received 192 PPP sub-project proposals, of which it has identified 107 eligible cases.
According to ADB estimates every dollar spent by IIFCL in sub-projects mobilises close to 7 dollar from the market.
"ADB is committed to assist India in promoting PPP projects, especially in the transport and power sectors, since infrastructure investments lead to higher farm and non-farm productivity, increases employment opportunities and incomes, and reduces poverty," said Cheolsu Kim, Principal Financial Sector Specialist in ADB's South Asia Department.
It said that India's economy has grown strongly in recent years. However, to expand, or even maintain, infrastructure in the face of a rapidly growing population, fiscal constraints, and the recent global financial crisis, is a major task requiring the support of the private sector.
"Although the government has carried out broad financial sector reforms to create a market environment for long-term and innovative financing required for infrastructure projects, products and market, the appetite from private sector investors for long-term finance for infrastructure is still limited," it added.
The new loan will help India meet its infrastructure investment target of 514 billion dollar under its current 11th Five Year Plan, and continue support for the government's effort to move forward the infrastructure agenda.
The multi-tranche loan will provide funds on commercial terms with more than 20 year maturities, which are not currently available in the domestic market.
"The facility is expected to enhance the availability of long-term funds for infrastructure and boost investor confidence when confidence is low," ADB said.
