The Centre’s decision to allow financially sound state government entities to borrow directly from overseas lending agencies for infrastructure projects will now help several Mumbai Metropolitan Region Development Authority (MMRDA) projects to be expedited. The immediate effect will be on the Mumbai Trans Harbour Link (MTHL), for which a loan by the Japan International Cooperation Agency (JICA) has already been approved.
“We had requested the Centre to give us direct loans so they have made some policy changes and as per the new policy, they can provide loans to us directly. The first project to benefit from this system will be MTHL but we will see if any other project, such as the metro projects, can also be routed through this system,” said U P S Madan, the metropolitan commissioner.
On Wednesday, Finance Minister Arun Jaitley had announced that the government had approved policy guidelines to allow financially sound state government entities, such as the MMRDA, to borrow directly from bilateral overseas lending agencies for implementation of vital infrastructure projects. The policy change has been effected after the MMRDA sought Centre’s help in obtaining a direct loan from the JICA for MTHL.
At a press briefing, the finance minister had specifically mentioned that the decision would benefit the implementation of the trans harbour sea link project.
Earlier, the central government had to pass loans through the state government with the latter then passing the same to the implementing agency. Now, loans can be forwarded to the state agency without entering the state government’s budget, said MMRDA officials. “The central government will give guarantee for our loans. So, the state government doesn’t have to take the loans on their books, which becomes their liability,” said Madan.
The decision will also help the state government avoid further loans and instead, be able to take loans for other projects.
The 22.8 km MTHL connecting Sewree with Nhava Sheva will be MMRDA’s first project to receive a loan directly from an overseas lending agency. The JICA and the MMRDA had already signed an agreement in March for the disbursal of the first instalment of the Rs 7,910 crore loan for the project. Although the MMRDA does not require the amount right now, JICA will directly release the funds to it as and when needed.
The MMRDA is considering to use the system for other projects also. “The decision will now benefit other state undertakings in implementing their projects as well. We have not yet received all the details regarding the policy. Once we get them, we will see if other projects, like the metros, fit the eligibility criteria and if they can also receive loans in a similar manner,” Madan said.
A few months ago, the MMRDA had faced issues in getting the state government to be the guarantor for obtaining loans for procuring rolling stock for Metro 2 and 7. The state government eventually agreed to be the guarantor for the loan from the Asian Development Bank (ADB).