With multi-crore infrastructure projects lined up for execution in the Mumbai Metropolitan Region, the city’s development authority is considering raising finances through foreign bonds as an alternative to project-specific loans, which often lengthen the execution period.
The Mumbai Metropolitan Region Development Authority (MMRDA) has projects with a cumulative price tag of nearly Rs 60,000 crore in the pipeline for implementation. These include a 118-km Metro network in Mumbai, a 22-km link from Sewri to Nhava Sheva across the Mumbai harbour and a 126-km multi-modal corridor from Virar to Alibaug.
MMRDA Metropolitan Commissioner U P S Madan said, “Currently, we have sufficient resources, but going forward, we are going to implement mega projects so we will need funds. One alternative is getting project-specific loans, but we are considering raising funds through foreign bonds. Foreign bonds have some advantages as compared with project-specific financing. We will first have to get a credit rating done for MMRDA to get started.”
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A foreign bond refers to a bond issued in a domestic market by a foreign entity in the currency of the domestic market. The MMRDA, which the chief minister chairs, does not get any annual allocation from the state government. The authority has been until now financing infrastructure work by auctioning its land bank in areas such as the Bandra Kurla Complex and Wadala. It has also availed of project-specific loans as in the case of the Rs 23,136-crore Colaba-Bandra-Seepz underground Metro, for which the Japan International Cooperation Agency (JICA) has committed Rs 13,235 crore.
“In case of project-specific financing, the agency granting a loan first evaluates the project and is involved in approvals at every process. That takes some time. In case of funds through foreign bonds, there will be no pre-evaluation and we will have a ready pool of finances to tap into,” said Madan.
For instance, the MMRDA has been unable to make much headway for the Sewri-Nhava Sheva Mumbai Trans Harbour Link, as JICA, from which it has sought a loan, has been appraising the Rs 11,000-crore project from technical, social and environmental aspects for over eight months. Even once the loan agreement is finalised, MMRDA will have to refer to JICA for its consent on every major decision on the project.
Ajay Saxena, an expert on public-private partnership and an adviser to the state government, however, said this
was beneficial as there was an extra check on the feasibility of the infrastructure project and additional expertise on board with project-specific financing.
“Also, when opting for a bond, the agency should have a very clear and risk-free plan of how it is going to service it. In project financing, one has to repay in small amounts over a period of time while in the case of bonds one has to be ready to bear a bullet payment,” said Saxena.