The Asian Development Bank (ADB) and the Bangalore Metro Rail Corporation Limited (BMRCL) on Tuesday signed a Facility Agreement for a $250 million loan through ADB’s non-sovereign lending window that signaled the multilateral lending agency’s first foray into the mass rapid public transport sector in South-Asia.
The loan, approved by the ADB Board in March last year, will part-finance the Bangalore metro project that aims to ease traffic congestion in the city and help move 40,000 passengers a day. The metro project comprises of two corridors with a track length of 42.3 km. Part of the east-west corridor of 18.1 km between Baiyappanahalli and M G Road became operational during October last year.
“The loan represents a number of firsts for ADB in its partnership with India. This is the first ADB loan to the urban transport sector without recourse to sovereign guarantees,” said Hun Kim, Country Director for India, who signed the loan on behalf of ADB. “Being the first metro rail project financed by the ADB in South Asia, this also reiterates ADB’s keen interest in supporting environmental improvement and decongestion in the fast-growing Indian cities with safe, effective and affordable public transport systems.”
The lack of mass transit public transportation systems in India’s urban centres can be a barrier to equitable and widespread economic growth and is leading to increased private vehicle use. This stimulates traffic delays, environmental degradation, inefficient fuel consumption and economic losses through time wastage.
N Sivasailam, Managing Director, signed the agreement on behalf of the BMRCL — a special purpose vehicle jointly owned by the Government of India and the Government of Karnataka — which is executing the project. “The ADB support to the BMRCL lends additional credibility to the project, especially in the financing model which has been jointly developed. The project is vital for providing the connectivity backbone to Bangalore’s future economic growth,” said Sivasailam.
The metro rail project could prove critical to fast-growing Bangalore which is home to over six million people, the country’s IT hub. The project includes a 24.2 km north-south corridor, 39 stations, electrical works, signaling and telecommunications system, centralized train control system, automatic fare collection, and 168 train cars.
The metro is designed to carry 40,000 passengers per day that is estimated to rise to 2 million passenger trips per day by the year 2021.
“The model developed through ADB’s sustained support to BMRCL during the loan design phase creates a bankable project structure which has the ability to attract commercial financing into similar projects in the sector. As such the value of ADB’s support goes beyond the loan itself and is likely to catalyze much needed private and commercial financing into the sector,” says Anouj Mehta, Senior Infrastructure Finance Specialist at ADB.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, it is owned by 67 members - 48 from the region.
The state-owned Life Insurance Corporation (LIC) has pumped in Rs 2,137 crore in four public sector banks through the preference share route.