Japanese loans for infrastructure projects only after green nod

Japan which funds infrastructure projects in India through its development assistance arm, the Japanese International Cooperation Agency (JICA), says it will now sign loan agreements only when most of the land acquisition and environment clearance is done. It will also increase funding if projects are implemented on time or in a smooth way.

"We are trying to sign loan agreements once environment clearance is given to the project and most of the land acquisition is done — not 100% but the major part. This is a lesson learnt from past experience," said Shinya Ejima, chief representative for JICA in India.

Multiple infrastructure projects in India have stalled because of a maze of approvals, delay in environment clearances and land acquisition taking years to come through. JICA lends money to the government for projects funded through public money.

While JICA, which has almost trebled its loan amount in the past decade, is committed to financing infrastructure projects, it will only increase the level of lending if projects are put on track faster. On the table are metro rail projects in Delhi, Kolkata, Mumbai, Bangalore and Chennai but commuters may have to wait as the agency will decide how much to lend after reviewing the on-going phases of the projects.

"Environment clearance is definitely needed for infrastructure projects and land acquisition must be done within the democratic system. If the government or the project executing agency skips the procedure, it creates repercussions after the implementation. We have guidelines on environment and social consideration which must be complied with," Ejima said.

JICA lent about Rs19,200 crore (at the current exchange rate) in 2012 and in March. "We are trying to maintain this level for the next five to 10 years. An increase in financing will depend on our own capacity as well as the absorptive capacity of the executing agencies in India," said the agency representative adding that the project executing bodies and state governments must implement projects on time or at least smoothly for the financial assistance to be increased further.

JICA is focusing on the Delhi-Mumbai and Chennai-Bangalore industrial corridors apart from a few other infrastructure projects. It is in talks with the government on which project to take up next and which ones should be funded with public money. About 640 km of the JICA funded first phase of the western freight corridor along the DMIC is in the process of financial bid evaluation and the remaining 280 km stretch is in the technical bidding stage.

In the past 10 years, the agency has committed a total of JPY 2,065 billion, which at the current exchange rate, would amount to Rs1.14 lakh crore. The bulk of this has been for the infrastructure sector — about 49% of its total assistance since 2002 has gone into transportation projects and 20% to the power sector.

This March, the Japanese agency agreed to give the Indian government soft loans up to Rs11,400 crore, a big chunk of which will be used for building the Dedicated Freight Corridor.