What's New Press Releases from the Embassy
Japan-India Relations
Press Release No.10

- Rs.5910 crore loan package to India - With 15.6% increase over last year India again the top recipient

New Delhi: 31 March 2006
The Government of Japan today agreed to extend a massive package of Official Development Assistance to India, in the form of soft loans totaling 155,458million yen (approximately Rs. 5910 crore). The Exchange of Notes to formalize the agreement to this effect was concluded this moring 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. Ashok Chawla, Additional Secretary, Ministry of Finance, Government of India on behalf of their respective Governments.
Largest-ever soft loan package to India
For the last three consecutive years since Financial Year 2003, India has been the top recipient of Japanese soft loan assistance. With the Yen loan commitment to India going up this year by 15.6 per cent over the previous year’s commitment, the Japanese assistance has attained new peak again. Even though, owing to difficult fiscal condition Japan’s overall loan budget has declined by about 50% over the last ten-year period, the assistance to India, by contrast, increased its share from 12% of Japan’s total ODA loan budget in FY1993 to approximately 28%in FY2005. This reflects the growing Japan-India development partnership and the importance Japan attaches to India.
The loan package

The loan package covers 10 large-scale projects in the areas of power, urban transportation, urban water supply and environment related projects. These concessional loans will be made available through the Japan Bank for International Cooperation (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. Among the projects, Delhi Metro Rail Project (Phase 2) and Bangalore Metro Rail Project deserve special mention. (See Enclosure 2 for outline of all the 10 projects.

Delhi Metro 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 estimated to cost over Rs.7500 crore will continue to receive financial assistance from Japan. With the improvement of transport infrastructure of metropolitan that is essential for Foreign Direct Investment(FDI) and which in turn will give a fillip to the economic growth.
Following the successful Delhi Metro project, the Bangalore Metro project will be built with a total cost of over Rs.5300 crore. The Bangalore Metro project will also receive the financial assistance from Japan. These two projects are expected to emerge as major symbols of cooperation between Japan and India in the urban transportation sector.

Strategic assistance for sustained economic growth and poverty alleviation

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, urban transportation, drinking water supply, irrigation, and afforestation projects.

Enclosure: 1. List of Projects
  2. Outline of Projects


Enclosure – 1
(in million yen)
1. Purulia Pumped Storage Project (III) 17,963
2. Bangalore Water Supply and Sewerage Project (II-2) 28,358
3. Rural Electrification Project 20,629
4. Delhi Mass Rapid Transport System Project (Phase 2) (I) 14,900
5. Visakhapatnam Port Expansion Project
(Engineering Services)
6. Swan River Integrated Watershed Management Project 3,493
7. Orissa Forestry Sector Development Project 13,937
8. Hussain Sagar Lake and Catchment Area Improvement Project 7,729
9. Kolkata Solid Waste Management Improvement Project 3,584
  Total 155,458
Enclosure – 2
Brief Outline of Yen-Loan Projects for FY 2005

1. Purulia Pumped Storage Project (III)

This ongoing project for building a pumped storage power plant with a capacity of 900 MW, which is the largest in India, will receive the third and final soft loan assistance of Rs.683 crores. This project aim is to not only meet the growing peak power demand in West Bengal, but it will also make effective use of surplus power supplied by adopting pumped storage power generation.

2. Bangalore Water Supply and Sewerage Project (II-2)

This project intends to support activation of the industry and improve living conditions in the rapidly growing Bangalore metropolitan area, by developing water supply and sewerage facilities, putting in place measures for comprehensive improvement of water business management, and developing water supply and sewerage system in the slums. The project gets the loan assistance of Rs.1078 crores.

3. Rural Electrification Project

With this project, power substations will be built and expanded and power distribution will be developed in Andhra Pradesh, Madhya Pradesh and Maharashtra. The project will improve living conditions and boost economic and social activities by supplying electricity to about 15 million people in the targeted states. The project gets the loan assistance of Rs.784 crores.

4. Delhi Mass Rapid Transport System Project (Phase 2) (I)

This loan is for the second phase of the Project comprising of 5lines (3 of which are extension of existing lines) extending a total of 53 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.566 crores.

5. Bangalore Metro Rail Project

The urban transport system in Bangalore could not keep pace with the rapid economic development and growing population of Bangalore and therefore has given rise to chronic traffic congestion and causing serious air pollution. This project aims to overcome these problems and promote economic activities by replicating the successful Delhi Metro model. When the entire length of 33 kilometres is operational, the system is expected to carry 1.07 million passengers a day, nearly the same volume as the subway system in Nagoya, Japan at present. The project gets the loan assistance of Rs.1699 crores.

6. Vishakhapatnam Port Expansion Project (Engineering Services)

The project aims to upgrade 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. The project gets this time the loan assistance of Rs.6 crores for the initial preparation (Engineering Services).

7. Swan River Integrated Watershed Management Project

Soil erosion and floods cause serious damage on agricultural land especially in the low mountain area, where there is not much space for arable land. In order to prevent soil erosion and raise the living standards local people, the project will undertake afforestation, construction of flood control facilities, soil protection and agriculture development in the catchment area of Swan River in Una district of Himachal Pradesh. The project gets the loan assistance of Rs.133 crores.

8. Orissa Forestry Sector Development Project

Increasing population and growing demand of timber have cause degradation of forests, soil and water conservation and thereby affected the living conditions of impoverished and tribes who rely on forests for living. This projects aims to regenerate forests and also take measures such as micro finance, livelihood generation activities to improve the living standards of inhabitants in and around forests. The project gets loan assistance of around 530 crores.

9. Hussain Sagar Lake and Catchment Area Improvement Project

With the sewerage system failing to catch up the rapid growth of population, untreated wastewater is flowing into the Hussain Sagar Lake in Hyderabad causing health hazards such as diarrhea, hepatitis and other waterborne diseases. This project aims to improve sanitary conditions and improve efficient water use by carrying out sewage treatment facilities and recycled water supply facilities and so on. The project will receive the loan assistance of Rs294crores

10. Kolkata Solid Waste Management Improvement Project

This is the first introduction of an appropriate regional waste management system not only in Kolkata Metropolitan area but across India. This system takes into account environment considerations, and promotion of 3R(reduce, reuse and recycle of solid waste) thereby improving hygienic conditions of the people in the region through adequate solid waste disposal. The project gets the loan assistance of Rs.136 crores.