AIIB to give $500-mn loan for Mumbai rail, $75 mn for renewable projects

Beijing-headquartered Asian Infrastructure Investment Bank (AIIB) will give a $500-million loan to develop suburban rail network in Mumbai and another $75 million to help finance renewable energy projects in India. 

The four-year-old infrastructure-focused multilateral development bank, in which India is the second-largest shareholder, plans to scale up lending operations to $10 billion annually, from $4.2 billion now. India’s share in the total borrowing is about 30 per cent, and is the largest borrower from the institution, said D J Pandian, AIIB vice-president and chief investment officer. With the latest loans, its India financing would be $2.9 billion. 

The Mumbai Urban Transport Project (MUTP) will use the funds for quadrupling of Virar-Dahanu Road corridor of 64 kilometers to provide an extension of the suburban railway service to connect peripheral areas with Mumbai. Under the project, a new suburban railway corridor between Panvel and Karjat will be constructed. The funding will also help develop other safety measures around the rail infrastructure to reduce fatalities. 

Women safety would be an important focus.

“Our projects should be women friendly and disable-safety compliant,” Pandian said. Being a long-term lender, the project loans can have a maturity profile of up to 35 years, but MUTP has its cap and, thus, the project loans would run for 20-25 years, he said. The rate of interest would be London Interbank Offered Rate (LIBOR) plus 0.75-1.4 per cent.   

However, land acquisition continues to remain a sensitive issue in India, and according to Pandian, 50-60 per cent of the land acquisition has been been done by the government for the projects. Typically, such projects cannot be started if 90 per cent of the land is not acquired.

The $75-million loan approval has been in favour of Tata Cleantech Capital, financier of renewable energy in India. The on-lending facility would be used to increase private capital investment in renewable energy, power transmission, and water infrastructure. 

Under the Paris Agreement, the government of India plans to reduce the country’s carbon intensity by 30-35 per cent of 2005 levels.

AIIB has contributed to 13 Indian projects to develop infrastructure and services in transport, energy, water, and finance.