$400 Million ADB Loan to Boost Private Investment in India Infrastructure

Feb 06, 2014

The Asian Development Bank (ADB) and the Government of India signed an agreement for $400 million first tranche loan under the Accelerating Infrastructure Investment Facility in India (AIIFI) to support the government’s efforts to accelerate infrastructure growth through increased private sector investment.

The tranche 1 loan is part of the ADB-approved $700 million AIIFI multi-tranche financing facility for providing two loans to India Infrastructure Finance Company Limited (IIFCL) that will be used to advance direct loans for project developers and to take out bank loans.

Nilaya Mitash, Joint Secretary (Multilateral Institutions), Department of Economic Affairs (DEA) at the Ministry of Finance signed the agreement on behalf of Government of India, and Narhari Rao, Officer In-Charge of ADB’s India Resident Mission, signed the agreement on behalf of ADB. Mr. Sanjeev Ghai, Chief General Manager, IIFCL, signed the project agreement for IIFCL.

“This assistance to IIFCL will allow it to lead the market evolution for infrastructure financing and catalyze greater private sector investment,” said Mr. Mitash. “It will support public-private partnership infrastructure projects in roads, power, including clean and renewable energy, and water supply and sanitation through financial modalities like direct lending, take-out financing, and subordinate debt.”

“Infrastructure investments will encourage growth and jobs. The investment requirements are huge. Leveraging private capital is one of the solutions to overcoming a huge investment funding gap to boost infrastructure. The IIFCL loan will spur investment in infrastructure that the country urgently needs to ensure strong economic growth,” said Mr. Rao.

Established in 2006, IIFCL is wholly-owned by the government and its borrowing program is fully backed up by government guarantee. At the end of March 2013, it had a pipeline of 349 infrastructure projects, with a total project cost of around $90 billion, of which IIFCL financing is expected to be around $10 billion through foreign and local market borrowing. Its pipeline is expected to grow by an average of 40-50 projects per year between 2014 and 2019.

The latest financing for IIFCL comes on top of a previous $500 million loan facility approved in 2007, which helped fund 30 public-private partnerships, including the Delhi and Mumbai international airports, and a further $700 million approved in 2009, which is still being disbursed.

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