US$ 150 million ADB loan to improve India's urban infrastructure

By Richard High11 August 2010

The Asian Development Bank (ADB) is extending a US$ 150 million multi-tranche loan facility to help India's National Capital Region (NCR) accelerate plans to construct urban infrastructure.

The ADB has approved the India National Capital Region Urban Infrastructure Financing Facility, which will provide funds in two or more tranches. This will extend long-term finance for improved urban services helping to encourage private investor interest, and support for a regional rather than city-centric approach to development, said the ADB.

India's fast growing economy and growing urban populations have seen municipal governments struggle to keep pace with the demand for services because of financing and capacity constraints.

In the NCR, which incorporates Delhi and sub-regions of three states, the population is expected to almost double from 37 to 64 million by 2021, and the NCR Planning Board has notified the Regional Plan 2021 that it has identified investment needs in transport, power, water and solid waste totalling about US$ 43 billion.

The extended financing facility will allow the NCR to accelerate planned investments by providing long-term funds. It will also identify bankable projects, extend capacity-building assistance for sub-borrowers to design and execute high-quality infrastructure, and help attract private investors and public-private-partnerships into the sector thereby improving the health and economic well-being of millions of urban residents.

Infrastructure planning in India's cities is often narrowly focused but the NCR Planning Board's Regional Plan seeks to take a broader approach, providing more comprehensive and environmentally-friendly development that can reduce negative aspects of urbanization such as pollution, slums and traffic jams.

Commenting on the extension of financing, Sekhar Bonu, principal urban development specialist in ADB's South Asia Department, said, "A regional approach is more proactive, enabling systematic and inclusive urbanization and sustainable growth and this is the basis of the NCR Planning Board's business plan and one of the primary motivations for the new financing facility."

The first tranche loan of US$ 78 million will have a 25-year term, including a 5-year grace period, and an annual interest rate determined in accordance with ADB's LIBOR-based lending facility.

An additional US$ 50 million will be provided by the NCR Planning Board for targeted investments.

The Planning Board is the executing agency for the investment program, which is expected to be completed by June 2017.

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