Asian Infra Bank to invest $1 billion in Indian projects

A $500-million investment in line four of metro rail and $600 million in suburban rail projects in Mumbai

The Asian Infrastructure Investment Bank (AIIB) is expected to invest around $1 billion in Indian projects this year. 

The Beijing-based multilateral development bank is looking at projects worth $5 billion next year.

Besides lending for projects directly, it is likely to invest $200 million through the National Infrastructure Investment Fund (NIIF) created by the central government, said D J Pandian, chief investment officer, and vice-president, AIIB. Last month, Abu Dhabi Investment Authority had signed a $1-billion agreement with NIIF that will be playing an incubation role for projects under the government’s Smart City, green energy and cleanliness programmes.  

A $500-million investment in Metro rail and $600 million in sub-urban rail projects in Mumbai, besides $340 million in Bengaluru Metro projects, are among those being evaluated. India is the second largest shareholder in the China-backed bank.

 

A major focus area for the bank would be clean energy and sustainable projects. “We have more projects in sustainable cities and urban rail. In India, we see the demand and need. We can build brand and our own capacity in these areas,” said Joachim von Amsberg, vice-president, policy and strategy, AIIB.

The AIIB board has approved $588 million investment across three projects and $150 million in India Infrastructure Fund, sponsored by Citi Group, IDFC, and IIFCL.

Amsberg said, “India has plans for energy transition but we have heard about the challenges in terms of offtakers and distribution companies and their strengths and diversity. We are aware of the aggressive bidding in the solar sector and we have to be concerned about sustainability of those companies investing in that space.”

In other markets it has been seen that sometimes bidders were too aggressive and made bids that were not financially viable, he added. “It is exciting to see declining prices of renewables but one has to watch if these bids are financially viable and companies can operate with these for 20 years or so.” On the risks surrounding contractual issues, which private companies have with state and Union governments, Amsberg said, “We have heard about the risks of tariff being renegotiated of earlier contracts. If the government wants to attract private investment you have to be a credible counterparty.”

AIIB is also looking to invest in power distribution businesses of Andhra Pradesh, Jharkhand, Uttar Pradesh and Chhattisgarh as part of “Power for All” programme of the government. Besides, $140 million would be invested in the Madhya Pradesh rural road programme.

Amsberg said three factors would govern their investment focus, which include creating sustainable infrastructure, value addition, and the quality of projects. Their line of credit would be for 22 years.