The Union Cabinet on Wednesday approved policy guidelines to allow state government entities to borrow directly from bilateral Official Development Assistance (ODA) partners for implementing vital infrastructure projects.
"State entities earlier didn't have permission to enter into financial arrangements with bilateral agencies. Such permission had to be taken by the state government, which meant the amount would become a part of their FRBM (Fiscal Responsibility and Budget Management)," Union Finance Minister Arun Jaitley told reporters here after a Cabinet meeting.
"This borrowing will be subject to fulfilment of certain conditions, and it would not be limited by the state's FRBM target," he said.
Jaitley said the eligibility criteria for state entities would be a revenue of over Rs 1,000 crore, and for infrastructure projects the cost criteria will be Rs 5,000 crore.
"These entities can approach bilateral agencies directly, so the funding would not come under the state FRBM... state budgets are already under much pressure," he added.
As a corollary to this decision, the cabinet allowed the Mumbai Metropolitan Region Development Authority (MMRDA) to borrow directly from the Japan International Cooperation Agency (JICA) for the construction of the Mumbai Trans Harbour Link. Of the estimated project cost of Rs 17,854 crore, the JICA loan is expected to be Rs 15,109 crore.
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