NEW DELHI:The Union Cabinet on Wednesday approved policy guidelines that will allow ‘financially sound’ state government entities to borrow directly from foreign agencies such as Japan International Cooperation Agency (JICA) to fund vital infrastructure projects.
At present, all external development assistance from bilateral and multilateral sources is received by the central government. This includes those meant for states. The existing guidelines do not allow direct borrowings by the state government entities from external agencies.
“This dispensation will allow the financially sound State entities to directly borrow and repay the loan required for major infrastructure projects without burdening the State exchequer,” said a finance ministry statement.
In such cases, state governments will furnish guarantees for the loans, while the Centre will give counter-guarantees.
Speaking to reporters after the Cabinet meeting here on Wednesday, Finance Minister Arun Jaitley said several state agencies were implementing infrastructure projects of national importance. These projects, even if viable and sound, have huge funding requirements. And, borrowing by state governments for such projects might exhaust their respective borrowing limits. By allowing state agencies to directly borrow could help states manage their Fiscal Responsibility and Budget Management targets, Jaitley noted.
According to the
finance ministry release, the Mumbai Metropolitan Region Development Authority, a state government entity, has also been allowed to borrow directly from JICA for implementation of Mumbai Trans Harbour Link (MTHL) project.
The estimated project cost of MTHL is Rs 17,854 crore, out of which the JICA loan portion is expected to be Rs 15,109 crore.
External assistance plays a supportive role in financing major infrastructure projects, social sector projects and in building up institutional capacity, the released noted.
India has an estimated funding requirement of Rs 43 lakh crore for infra projects over the next five years.