US$ 700 million loan for Indian PPPs

By Chris Sleight18 November 2009

The Asian Development Bank (ADB) has announced a US$ 700 million loan to India to help the country implement its programme of public-private partnership (PPP) infrastructure construction. The funds follow a similar US$ 500 million loan made in 2007.

The money will be released over five years to the state-owned India Infrastructure Finance Company Ltd (IIFCL), a body that was set up in 1996 to promote PPPs. IIFCL will use the money to lend to PPP projects on commercial terms over 20+ year maturity terms, filling a gap in the infrastructure financing market that the ADB says is not catered for.

IIFCL says that as of August this year it had received 192 PPP project proposals, 107 of which it deemed eligible for funding. It is estimated that for every US$ 1 of IIFCL investment, a further US$ 7 is mobilised from capital markets, which is to say that the US$ 700 million ADB loan could facilitate a total investment in Indian infrastructure of US$ 5.6 billion.

Cheolsu Kim, principal financial sector specialist in ADB's South Asia Department said, "ADB is committed to assist India in promoting PPP projects, especially in the transport and power sectors, since infrastructure investments lead to higher farm and non-farm productivity, increases employment opportunities and incomes, and reduces poverty.

In addition to the ADB's loans, September saw the World Bank announce a US$ 1.2 billion loan to IIFCL, as part of a wider US$ 4.3 billion package of funds for the country's infrastructure sector.

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