ADB Loans India $500M to Promote Public-Private Partnership Infrastructure Projects
MANILA, PHILIPPINES - The Asian Development Bank (ADB) will provide India with up to $500 million in loans designed to promote public-private partnerships between the government and private sector in order to ramp up investments in infrastructure. The funds will be provided to government-owned India Infrastructure Finance Co. Ltd. (IIFCL) in multiple tranches over the next four years. It is estimated that the money will help catalyze private-sector investments in infrastructure of up to $3.5 billion. The government has been the main provider of infrastructure in India. However, public financing alone will not be able to meet the estimated $475 billion needed between now and 2012 for roads, railways, seaports, airports, electricity transmission lines and other infrastructure. “A serious lack of infrastructure is seen as India’s ‘Achilles’ heel’ and it is estimated to cost the country 3-4% in terms of gross domestic product every year,” said Cheolsu Kim, Principal Financial Sector Specialist at ADB. “India needs to double its current level of investment in infrastructure and to increase and mainstream public-private partnerships.” IIFCL will provide funds at commercial terms with over 20-year maturity for infrastructure projects, which is not currently being provided by the market. “Establishing IIFCL to provide funds for public-private partnerships is central to the government of India’s infrastructure development strategy for addressing the prevailing market inadequacies and at the same time keeping the infrastructure development agenda moving forward,” said Ashok Sharma, Director of Governance, Finance and Trade Division of ADB’s South Asia Department. IIFCL has a financing plan for fiscal year 2007-2011 of $6 billion. Half of that will come from the Indian domestic market, including insurance, pension funds and the National Savings Scheme. The other half will come from the international capital markets and bilateral and multilateral sources, including ADB. IIFCL has obtained its first international credit rating by an accredited international rating agency through a technical assistance from ADB. A technical assistance of $500,000 is included to support the capacity development of IIFCL for managing market and credit risks and training IIFCL staff in subproject risk appraisal, management and mitigation. Private-sector investments in infrastructure will help the government contain and reduce the fiscal deficit at all levels. Better infrastructure will help boost the economy and reduce poverty. Infrastructure sector reforms in India are encouraging the participation of the private sector from domestic and international sources. In addition, significant efforts are ongoing to mainstream public-private partnerships in several levels of the government through technical assistance and in partnership with ADB. About ADB | 
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