JICA may fund Chennai, Bangalore ring roads

December 23, 2013

By KR Sudhaman

Japan International Cooperation Agency (JICA), which has stepped up annual lending to India to $3-3.5 billion, might lend about $600 million to construct outer ring road in Bangalore and Chennai as part of its plan to finance Chennai-Bangalore industrial corridor.

JICA’s chief representative in India, Shinya Ejima, told Financial Chronicle that it might take up these two projects even before the master plan for Chennai-Bangalore-Chitradurga industrial corridor is ready. The plan is expected to be completed by March next year.

“We have not finalised the funding amount as yet, but it could be up to $300 million each,” he said.

JICA, which has funded up to Rs 30,000 crore for the Delhi Metro project, has also funded Bangalore, Chennai and Kolkata metro projects. It has also pumped in Rs 4,700 crore to fund the underground portion of the 60 km Colaba-Virar metro project to be jointly taken up by union and Maharashtra governments.

“The Rs 4,700 crore commitment for 33.5 km underground stretch of the metro project in Mumbai is perhaps the first instalment. There could be one or two more instalments as it’s a big project,” he said.

According to Ejima, there are demands from Indian government for funding more metro projects in the country, including that of Kochi and Lucknow. But so far no decision has been taken as the financial viability of these two metros is yet to be ascertained, he said.

JICA, which provides nearly 50 per cent of its overseas development assistance to India, also give long-term financial assistance at a low interest of 1.4 per cent with a repayment period of 30 years, including a 10-year grace period.

Ejima claimed that JICA’s loans are the cheapest and is lower than that of World Bank and ADB loans. JICA loans provided to environmental projects carries an interest rate of a mere 0.2-0.3 per cent.

China was the largest recipient of JICA loans until 2000 with an annual commitment of $2 billion. JICA has stopped lending to China since 2008. Now India is the largest recipient and its annual commitment would be $3-3.5 billion in the next couple of years. India is keen that Japan step up its annual commitment, which is likely after a couple of years, Ejima said.

The potential for Japanese investments in India is huge. About 30,000 Japanese private companies have invested in China, whereas in India it is surging towards 1,000 mark. Comparing the two, Ejima said in China decisions are taken quickly where as in India there are a lot of procedural delays. But the scenario is improving, added Ejima.

India can also be a major manufacturing hub for Japanese companies for exports to countries in Africa and West Asia and there are a lot of medium and small Japanese companies want to set up in India, but they want faster and easier clearances.

Ejima said JICA, which has lent $1.5 billion for the Delhi-Mumbai dedicated freight corridor did not expect Chennai-Bangalore freight corridor happening in the immediate future. JICA would basically set up two to three industrial townships along Chennai-Bangalore corridor, as the region already has good roads and good rail connectivity.

There will be Japanese investments in Delhi-Mumbai industrial corridors, but by private players. Lately, a private Japanese company is interested in building airport at the new industrial town Dholera coming up near Ahmedabad on DMIC and JICA is partly funding the feasibility of the project.

Ejima said water and energy are two major areas of JICA funding in India apart from transport sector. JICA will also be funding forestry projects every year in India. JICA annual funding has grown from $1.2 billion in 2001 to $3.5 billion in 2012. Only in 2010, the funding had dropped to 0.48 billion due to the devastating Tsunami disaster in Japan.

Though JICA has funded metros and dedicated freight corridors, “We are not helping Indian railways directly and the immediate reason is there is no official request from Indian government to support Indian railways,” he said adding for all the projects JICA has funded until now, the request came from the Indian government.

Ejima said Japan could look at funding high-speed rail corridor. One is Mumbai-Ahmedabad and other one could be Chennai-Bangalore. “Recently, we have appointed consultants for joint feasibility study with Indian Railways for Mumbai-Ahmedabad high speed rail corridor,” said Ejima.

According to Ejima, the huge investment of Rs 63,000 crore on Mumbai-Ahmedabad is worthwhile. He points out that when the high-speed train between Tokyo-Osaka was launched in 1964, the per-capita income of Japan was only $900. Given that India’s per-capita income is pegged at $1200-$1300, it should be a viable project, he said adding that the joint feasibility report would reflect on these aspects.

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