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'States can borrow directly from fgn agencies for infra projs'

Press Trust of India  |  New Delhi 

The Centre today permitted state entities to borrow directly from bilateral overseas lending agencies like JICA to fund infrastructure projects.

The decision will directly benefit large infrastructure projects like the trans-harbour link (MTHL), Minister told reporters here after the Union Cabinet took decision in this regard.


An official release said the has approved the policy guidelines to allow financially sound state entities to borrow directly from bilateral ODA (Official Development Assistance) partners for implementation of vital infrastructure projects.

The Metropolitan Region Development Authority (MMRDA), a state entity, has also been allowed to borrow directly from International Cooperation Agency (JICA) for implementation of MTHL project.

The estimated project cost for MTHL is Rs 17,854 crore, out of which JICA loan portion is expected to be Rs 15,109 crore.

Jaitley said the decision will help create infrastructure as state entities can now get funds for big projects.

While state governments will furnish guarantees for loans, the Centre will provide counter-guarantees.

External assistance today plays a supportive role in financing major infrastructure projects, social sector projects and in building up institutional capacity.

Jaitley said the decision will help states manage their Fiscal Responsibility and Budget Management (FRBM) targets.

Presently, external development assistance from bilateral and multilateral sources is received by the of India for projects/programmes in the central sector; for projects executed by central PSUs; and on behalf of the state governments for state sector projects/programmes.

The existing guidelines do not allow direct borrowings by the state entities from external agencies.

Several state agencies are implementing major infrastructure projects. These projects, even if viable and sound, have huge funding requirements and borrowing by the state governments for such projects may exhaust their respective borrowing limits.

"This dispensation will allow the financially sound State entities to directly borrow and repay the loan required for major infrastructure projects without burdening the State exchequer," the release said.

The approval of these guidelines reiterates the central government's commitment to promote inclusive growth and strengthen the economy, it added.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, April 19 2017. 18:07 IST
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