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Japan-India Relations
Press Release No.9

Embargo: 18:00hrs
New Delhi: October 22, 2008

JAPAN EXTENDS SOFT LOAN PACKAGE TO INDIA UNDER THE FIRST TRACK OF FY2008

- The Exchange of Notes for Rs.4,555 crore loan package was concluded during H.E. Dr. Manmohan Singh’s visit to Japan
1. The Government of Japan today agreed to extend a package of Official Development Assistance to India, in the form of soft loan assistance totaling 99,019 million yen (approximately Rs.4,555 crore). The Exchange of Notes to formalize the agreement to this effect was concluded on October 22nd at a ceremony held in Tokyo. The Notes were signed and exchanged between Mr. Hirofumi Nakasone, Minister for Foreign Affairs and H.E. Mr. Hemant Krishan Singh, Ambassador of India to Japan on behalf of their respective Governments.

Japanese Assistance to India in these years
2. For the last five consecutive years since Financial Year 2003, India has been the top recipient of Japanese soft loan assistance. In addition, the Yen loan commitment to India has been increasing every year, attaining new peaks. Given the situation where Japan’s overall loan budget has been receiving much pressure under severe fiscal condition, the substantial amount of assistance to India in these years reflects the growing Japan-India development partnership. The ODA soft loan package of 99,019 million yen under the first track of FY2008 follows this trend. Furthermore, the conclusion of exchange of notes in front of the two premiers just after the summit meeting on 22nd October accentuates the importance Japan attaches to the economic ties with India.

Highlights of the loan package

3. The loan package covers 4 large-scale projects in the areas of transportation, environment and finance. These concessional loans will be made available through the Japan International Cooperation Agency (JICA), at the interest rate ranging from 0.3% to 1.2% per annum with the repayment period ranging from 15 to 30 years including the grace period. This is the first ODA soft loan package provided through JICA after the section of Japan Bank for International Cooperation (JBIC) in charge of soft loan shifted to JICA. Among the projects, Chennai Metro Project and Micro, Small and Medium Enterprises Energy Saving Project deserve special mention. (See Enclosure 2 for outline of all the 4 projects.)

• Chennai Metro Project – Chennai, the state capital of Tamil Nadu, has the 4th large population in India and known for its high population density. Those habitants in Chennai daily rely on automobiles and two-wheeled motor vehicles as means of transportation. As the registered number of those vehicles is increasing in these years, traffic congestion in the city arose as a big problem. Through constructing the efficient subway and elevated railway system, this project will improve the urban environment by relieving congestion. In addition, the regional economy would be developed accordingly and the emission of exhaust gases is expected to be reduced.

• Micro, Small and Medium Enterprises Energy Saving Project – The limited financing ability and technology among micro, small and medium enterprises have been hurting their efforts toward energy saving activities. With this background, the project offers medium- and long-term loans specially designed for energy saving to those companies through the Small Industries Development Bank of India (SIDBI) or financial institutions which SIDBI will specify. This two-step or three-step loan system will also strengthen the lending ability of those implementing banks. Eventually, the project is expected to contribute to the efficient use of energy and environmental improvement in India.

4. The main objectives of Japanese loan assistance to India are to support India’s efforts to establish infrastructure to boost and sustain economic growth, alleviate poverty and improve environmental issues. With the projects supported under the first track of FY2008, the Japanese government expects to achieve these goals successfully.

Enclosures: 1. List of Projects
                2. Outline of Projects
Enclosure - 1
JAPAN’S ODA LOANS TO INDIA FOR 2008-2009 (First Batch)


LIST OF PROJECTS
 
PROJECT
AMOUNT
(in million yen)
1 Chennai Metro Project
21,751
2 Hyderabad Outer Ring Road Project (Phase 2)
42,027
3 Capacity Development for Forest Management and Personnel Training Project
5,241
4 Micro, Small and Medium Enterprises Energy Saving Project
30,000
           Total
99,019
Brief Outline of Yen-Loan Projects for FY 2008 (First Batch)

1. Chennai Metro Project
       This project aims for the construction of a total length of 43km of subway and elevated railway in Chennai. This will help to develop the regional economy and improve the urban environment by relieving congestion and reducing the emission of exhaust gases.

 2. Hyderabad Outer Ring Road Project (Phase 2)
       This project aims to respond to road traffic demands through the construction of the north-eastern zone (approximately 33km) of the outer ring road (total length 158km) in the Hyderabad metropolitan area. The north-western zone (approximately 38km) was already covered by the Japanese ODA soft loan (41,853 million yen) under the second track of FY2007. Together with the phase 1 project, this phase 2 will contribute to an easing of traffic congestion in the city center and growth of the regional economy.

 3. Capacity Development for Forest Management and Personnel Training Project
       This project aims to improve the training capacity of the state governments’ forest management authorities (10 states), by the means of improving the contents of forest management training and renovating aging facilities. Although the local staffs of forest management authorities are expected to fully cooperate with local residents under the Joint Forest Management policy, the training contents for them do not reflect the needs sufficiently. The project is expected to contribute to the development of human resources for sustainable forest management.

 4. Micro, Small and Medium Enterprises Energy Saving Project
       This project aims to promote the energy saving activities of micro, small and medium enterprises by the means of offering medium and long-term loans specially designed for energy saving to those companies and improving the financing ability of the implementing agency. Accordingly, the project is also expected to contribute to environmental improvement and sustainable economic development in India through the efficient use of energy.