1. The Government of Japan today agreed to extend a massive package of Official Development Assistance to India, in the form of soft
loans totaling 184,893 million yen (approximately
Rs.6916 crore). The Exchange of Notes to formalize the agreement to this effect was concluded this morning at a ceremony held in the Ministry of Finance in New Delhi. The Notes were signed and exchanged between H.E. Mr. Yasukuni Enoki, Ambassador of Japan to India, and Mr. Kumar Sanjay Krishna, Joint Secretary, Ministry of Finance, Government of India, on behalf of their respective Governments.
Package sets new peak of Japanese assistance again
2. Looking back, India was the first country to be offered loan assistance when Japan launched its financial assistance program in 1958. Over the years, our soft loan assistance to India has expanded to cover a wide range of areas, from economic infrastructure to afforestation and preservation of cultural heritage.
FY 2003 was a landmark year for the Japan-India development partnership, as India became the largest recipient of yen loan assistance from Japan that year. Since then, for the last four consecutive years, India has been the top recipient of Japanese soft loan assistance. With the yen loan commitment to India going up this year by 18.9 per cent over the previous year’s commitment, the Japanese assistance has attained new peak again.
While the total amount of Japanese soft loan to developing countries is decreasing, that of Japanese soft loan to India, by contrast, is increasing substantially for these years. This reflects how deeply the Japan-India development partnership grows, and how far Japan attaches the importance to India.
Highlights of the loan package
3. The loan package covers 11
large-scale projects in the areas of power distribution,
transportation, irrigation, water supply, drainage
and environment. These concessional loans will be made available through the Japan Bank for International Corporation (JBIC), generally at the rate of interest of 1.3% per annum with the repayment period 30 years, including the grace period of 10 years, or at the rate of interest of 0.75% per annum with the repayment period 15 years, including the grace period of 5 years. Among the projects, Delhi Metro Project and Bangalore Power Distribution Project deserve special mention. (See Enclosure 2 for outline of all the 11 projects)
•
Delhi Mass Rapid Transport System Project (Phase
2) – This project has earned the reputation of being a model project and a symbolic example of Japanese cooperation to India. Phase 2 of Delhi Metro Project will continue to receive financial assistance from Japan. The
project aims to promote economic activity as well
as improve the urban environment through the reduction
of traffic congestion and vehicle emissions in the
capital territory of Delhi. Additionally, by extending Metro line to Qutab Minar in Phase 2, it is also expected to promote tourism, as Qutub Minar is one of famous and registered World Heritage Sites.
•
Bangalore Power Distribution Project – Bangalore is developing rapidly with many foreign companies having established offices and factories, including the largest Japanese car manufacturer. For this reason, electricity consumption is also growing dramatically, and power failure is becoming a big obstacle to further economic growth. This project aims to stabilize electric power supply by upgrading distribution system and will remove bottleneck of economic activity as well as improve access to electric power for the households.
Strategic assistance for sustained economic growth and poverty alleviation
4. The main objective of Japanese loan assistance is to support India in establishing physical infrastructure to boost and sustain economic growth. At the same time, Japanese assistance seeks to support India’s efforts to alleviate poverty. In keeping with these goals, the loan package strategically covers power distribution, transportation, irrigation, water supply, drainage and environment projects.
Enclosures:
1. List of Projects
2. Outline of Projects
Enclosure – 1
JAPAN’S ODA LOANS TO INDIA FOR 2006-07
LIST OF PROJECTS
| PROJECT |
AMOUNT
(in million yen)
|
| 1. Delhi Mass Rapid Transport System Project (Phase 2) (II) |
13,583 |
| 2. Visakhapatnam Port Expansion Project |
4,129 |
| 3. Bangalore Distribution Upgradation Project |
10,643 |
| 4. Transmission System Modernization and Strengthening Project in Hyderabad Metropolitan Area |
23,697 |
| 5. Andhra Pradesh Irrigation and Livelihood Improvement Project |
23,974 |
| 6. Tripura Forest Environmental Improvement and Poverty Alleviation Project |
7,725 |
| 7. Gujarat Forestry Development Project (Phase 2) |
17,521 |
| 8. Kerala Water Supply Project (II) |
32,777 |
| 9. Agra Water Supply Project |
24,822 |
| 10. Amritsar Sewerage Project |
6,961 |
| 11. Orissa Integrated Sanitation Improvement Project |
19,061 |
Total |
184,893 |
Enclosure – 2
Brief Outline of Yen-Loan Projects for FY 2006
Delhi Mass Rapid Transport System Project (Phase2)(II)
This loan is for the second phase of the Delhi Metro Project comprising of 5lines (3 of which are extension of existing lines) extending a total of 54 kilometers. Once entire length of second phase is fully operational, 2.59 million commuters are expected to use Metro per day thereby improving the urban environment through the reduction of traffic congestion and vehicle emissions in the capital territory of Delhi. This project gets the loan assistance of Rs.508 crores. Visakhapatnam Port Expansion Project
The project aims to enhance transport capacity and improve effectiveness of Visakhapatnam Port by consolidating the iron ore stockpiling site, dredging waterway and berth, and strengthening mooring facilities, thereby contributing to the country’s greater iron ore exports and economic growth. In last year’s yen loan package, Japan extended a loan of Rs. 6 crores for the initial preparation (Engineering Services). This project gets the loan assistance of Rs.154 crores this year.
Bangalore Distribution Upgradation Project
This project intends to support activation of the industry and improve living conditions in the rapidly growing Bangalore metropolitan area, by upgrading electric power distribution system. For the improvement of services, implementing agency will also carry out a survey on consumers’ opinion with the cooperation of USAID and NGOs. This project gets the loan assistance of Rs.398 crores.
Transmission System Modernization and Strengthening Project in Hyderabad Metropolitan Area
The electric power supply system in Hyderabad could not keep pace with the rapid economic development and growing population for Hyderabad and therefore has resulted in frequent power failures. This project aims to overcome these problems and remove bottleneck of economic activities by improving and stabilizing the power supply ability through modernization and strengthening of transmission system. Decline in the rate of transmission loss and reduction of power failures are expected. This project gets the loan assistance of Rs.886 crores.
Andhra Pradesh irrigation and Livelihood Improvement Project
This comprehensive project aims at increasing agricultural output by constructing new irrigation facilities in rainfall agricultural areas, rehabilitating existing minor irrigation facilities, improving the ability of farmers’ water user association for maintenance of irrigation facilities, and disseminating farming technology in the rain-deficient state of Andhra Pradesh. Construction of irrigation facilities will be selectively carried out in the northern part where the poverty rate is higher than other parts of the state and the project will help upgrade the living conditions of the poor. This project gets the loan assistance of Rs.897 crores.
Tripura Forest Environmental Improvement and Poverty Alleviation Project & Gujarat Forestry Development Project (Phase 2)
Under these two projects for environmental improvement, trees will be planted with the participation of community residents in very large areas in the respective states of Tripura and Gujarat, to revive forests and to improve living conditions of the local people. Under the project, local populace will be provided occupational training. Also micro-finance will be extended to those who depend on forests for living. The Tripura and Gujarat projects get the loan of Rs.289 crores and Rs.655 crores respectively at a very low rate of interest of 0.75% per annum.
Kerala Water Supply Project (II) & Agra Water Supply Project
Due to the increase of population and rapid industrialization, the shortage of water supply is becoming a serious problem and the provision of water supply facilities is an urgent issue to secure stable water supply in India. These two projects intend to support activation of the industry and improve living conditions by developing water supply facilities. In the case of Agra Water Supply Project, lots of tourists visiting Taj Mahal, famous and registered World Heritage Site, will also be beneficiaries by the improvement of health condition in Agra city area. Kerala and Agra projects respectively get the loan of Rs.1226 crores and Rs.928 crores.
Amritsar Sewerage Project & Orissa Integrated Sanitation Improvement Project
With the sewerage system failing to catch up the rapid growth of population, untreated wastewater is flowing into river causing health hazards. These two projects aim to improve sanitary conditions by carrying out sewage treatment facilities. Amritsar, being the holy for Sikhs, attracts a large number of pilgrims and tourists who will also get benefited with this project. In the case of Orissa Integrated Sanitation Improvement Project, rainwater displacement facilities will be also supplied for the further improvement of sanitary conditions. Amritsar and Orissa projects get the loan of Rs.260 crores and Rs.712 crores respectively at a very low rate of interest of 0.75% per annum.
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