World Bank extends $3 bn to IIFCL, Sidbi, PowerGrid

The World Bank has agreed to provide $3-billion, long-term loan to three companies — India Infrastructure Finance Company (IIFCL), Small Industries Development Bank of India (Sidbi) and Power Grid Corporation (PGCIL) — as the global financial crisis undermines private financing for the country’s much-needed infrastructure sector.

Sources said IIFCL will get $1.2 billion for a period of 30 years at an interest rate of around the London Inter-Bank Offered Rate (Libor), sources said. Similarly, Sidbi, which has received a $100-million line of credit from the World Bank this year, is pitching for another $400 million during the financial year.

For the next financial year, the lender has sought a $100-million line of credit from the multilateral financing agency. The remaining $1.7 billion may flow to PGCIL.

The line of credit to IIFCL will help finance private-public partnerships in infrastructure, while the funding for Sidbi will support credit flow to small and medium enterprises (SMEs) and assistance to PGCIL is aimed at expanding its transmission network.

The assistance to these companies is a part of the World Bank’s total financing envelope of $14 billion proposed in the India Country Strategy over 2009-2011.

The strategy, which is geared to help India fast-track infrastructure development, support the country’s seven poorest states and respond to the financial crisis, was discussed by the bank’s board last week in Washington DC, the multilateral institution said in a statement.

Other areas that could receive support from additional financing include the National Housing Bank and the recapitalisation of state banks, the details of which are yet to be discussed with the Centre.

The government had requested a total additional amount of $5.6 billion over the next two years. Having provisioned for $3 billion, the World Bank said it would need to examine the balance $2.6 billion and work with the government over coming weeks to clarify the details.

India was the largest IDA (International Development Association) and the second-largest IBRD (International Bank for Reconstruction and Development) borrower from the World Bank in FY08. The World Bank’s $15.1-billion portfolio in the country covers 61 active investment projects.

In 2007-08, the World Bank board approved $2.7 billion in funding for nine new projects for India, spanning a range of sectors, including infrastructure, education, health and rural development. Of this, $1.3 billion came from IBRD and $1.4 billion came as interest-free credit from IDA.