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India : Government approves plan to raise concessional loans of $4.5 from JAPAN.

The government set the stage for starting of work on the determined Delhi-Mumbai Industrial Corridor, accepting a program to raise concessional loans of $4.5 billion (around Rs 29,000 crore) from Japan, in addition to a new industrial hub along the Amritsar-Kolkata route. The CCEA also cleared industrial townships in Greater Noida and near Ujjain, along with a solar hub in Neemrana, in what is seen as a concrete movement towards constructing new cities along the 1,500 km corridor from Delhi to Mumbai.

The green light for Japanese support comes days ahead of Shonzo Abe's visit and thumbs down an unpleasant mounted by the department of economic affairs (DEA), which said the loans were tied help that will offer undue gains to organizations from the Asian economic giant.

Although DEA was uncomfortable even with the customized program, the CCEA agreed on a Special Terms for Economic Partnership (Step) loan from Japan International Cooperation Agency(JICA). The 40-year loan, with a 10-year moratorium, will entice an interest rate of 0.1%. In contrast, other standard official development assistance (ODA) loans cost 0.8-1.4% with a repayment period of 15-30 years.

A Step loan needs at least 30% sourcing from Japanese organizations, which was the major bone of contention with DEA. The acceptance came with the rider that at least two organizations will participate in the "price discovery" mechanism, which in other words mean that even after bidding, the agreement will not be given if there is only one bidder. In addition, as a special step, JICA has decided to treat organizations where Japanese fimrs hold up to 10% as those qualified for the special sourcing arrangement. So, a collaboration, where an Indian associate holds a 90% stake and the rest with Japanese company, will be entitled to be included in the 30% sourcing clause.

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Publication:Mena Report
Geographic Code:9INDI
Date:Jan 22, 2014
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