World bank agrees on VGF scheme for roads

Ready to assist in annuity-based BOT projects.

The World Bank has agreed to provide viability gap funding (VGF) and assistance in annuity-based build, operate and transfer (BOT) projects to develop highways in the country.

Under the VGF scheme, funds and concessions are provided to developers to make projects profitable for them. This funding could, at present, be up to 40 per cent of the total project cost.

BOT (annuity) is one of the public-private partnership (PPP) models used for developing highway projects. Under this model, the developer finances and builds the highways and the government pays it every six months and collects the toll on the highways.

After his meeting with World Bank President Robert Zoellick, Road Transport and Highways Minister Kamal Nath today said in a seminar: “The World Bank has agreed to look at viability gap funding and annuity projects. It is considering providing institutional support for development of these projects as well.”

The ministry is also looking for a $2.96-billion loan from the World Bank for double-laning of 6,300 km of the 19000 km single-lane highways in the country. The minister, however, added the modalities of the loan were being worked out by the finance ministry.

Nath also added: “We may have to avail of the loan in tranches. There are many other projects in the social sector which require financing. The final decision regarding the loan for highway projects will be taken by the finance ministry.”

The loan from the World Bank is essential to meet the stiff targets the ministry has set for itself to develop road projects in the country. The National Highways Authority of India has a target to award 126 projects, covering 11,928 km and worth Rs 1,00,000 crore, in 2009-10. Fifty projects have been awarded till date, 15 of which are being funded by the World Bank.

The authority has recently extended the stipulated time for awarding the remaining 76 projects to June 2010. The delay, NHAI officials said, was on account of problems in certain clauses of the model concession agreement which defines the procedure of awarding PPP projects.

The authority, in its work plan for the financial year 2010-11, plans to award 92 projects, covering 11,721 km valued at about Rs 1,00,000 crore.

Lending to rise three times
The World Bank is expected to increase its lending to India three times to $7 billion in 2009-10, against an average commitment of about $2.3 billion in the last four financial years.

“The average commitment during the last four financial years from the World Bank has been approximately $2.3 billion. However, in the current year, they are expected to reach about $7 billion,” the government said in a statement after Zoellick’s meeting with Finance Minister Pranab Mukherjee on Wednesday.

Zoellick to meet PM, Cabinet ministers, companies
Zoellick will meet Prime Minister Manmohan Singh, senior Cabinet ministers and heads of some private sector companies during his four-day visit to India.

This is his second visit to India as the head of the World Bank. He last visited the country in November 2007. On Thursday, he will visit Rajasthan’s Tonk district, where he will meet Chief Minister Ashok Gehlot, besides some state government officials.

Ganga conservation
The World Bank will give a $1-billion aid to the government for cleaning and conserving the Ganga, whose basin supports around 400 million people.

The estimated cost of stopping the discharge of untreated sewage and industrial effluent into the Ganga by 2020 is $4 billion.

“This is a project of enormous national importance and I am pleased that the World Bank has come forward to assist us,” said Environment and Forests Minister Jairam Ramesh while releasing a joint statement with the World Bank here today. The first of the loans or credits will be approved between July 2010 and June 2011.

Moreover, the World Bank will also assist the ministry in the conservation and protection of tigers.