Contacts:
In Delhi:
Sudip Mozumder
(91 11) 2461-7241
smozumder@worldbank.org
In Washington:
Erik Nora
(202) 458 4735
enora@worldbank.org NEW DELHI, October 13, 2009 ─ Loan Agreements for three projects amounting to US$ 4.2 billion equivalent were signed today by the representatives of the Government of India, India Infrastructure Finance Company Ltd (IIFCL), Powergrid Corporation of India and the World Bank. The three projects were the Banking Sector Support Loan of US$ 2 billion equivalent, the India Infrastructure Finance Company Ltd or IIFCL of US$ 1.195 billion equivalent and the Fifth Power System Development Project of US$ 1 billion equivalent. Mr Anup K. Pujari, Joint Secretary, Government of India signed on behalf of the government for all the three projects, and Mr Roberto Zagha, Country Director for India signed on behalf of the World Bank. Mr S.S.Kohli, Chairman and Managing Director, IIFCL and Mr S. K. Chaturvedi, CMD of Powergrid Corporation of India signed on behalf of IIFCL and Powergrid, respectively. After a period of high economic growth — which reached 9.7 percent in 2006-07 — the onset of the global financial crisis in 2008 saw India’s growth rate fall to about 5-6 percent in the fourth quarter of 2008-09. Recognising the challenge that developing countries were facing in wake of the crisis, the G20 guided the World Bank and other multilateral development banks (MDBs) to use their full capacity to sustain their growth by helping finance counter-cyclical spending, bank recapitalization, infrastructure, trade finance, balance of payments support, debt rollover, and social support. The three loans signed today respond to this guidance. They will help containing the spill-over effects of the global financial crisis, and by so doing, contribute to global financial stability and recovery.
“This is a crucial time.” said Roberto Zagha, World Bank Country Director for India. “While the worst of the crisis seems to be behind us, doubts linger about the strength of the comeback, partly because the strength of the global recovery is uncertain. Today’s support will help maintain credit growth and continued infrastructure investments in the country. Supporting infrastructure is particularly important during the current crisis, not just to sustain the domestic economy at a time of reduced global demand, but even more to lay the foundations for stronger future growth.”
The US$2 billion Banking Sector Support Loan will provide budgetary support to the Government of India, helping it maintain its broad economic stimulus program by, among other measures, enhancing the capital of select public sector banks. As a result of the global financial crisis, private and foreign banks have slowed their lending and deposit taking, increasing demand on public sector banks. This loan will help maintain credit growth levels, support social banking and employment growth, and help strengthen the economic recovery ahead.
Sustaining high growth and making it more inclusive is one of India’s most formidable challenges. Central to this is the need to improve its physical infrastructure. India’s roads, railways, ports, airports, and above all, power supply, are urgently in need of investment. The US$1.2 billion loan to the India Infrastructure Finance Company Ltd. (IIFCL) is designed to support its role to catalyze private financing for public-private partnerships in (PPPs) in infrastructure and stimulate the development of a long-term local currency debt financing market.
“This loan will help IIFCL increase the availability of long-term finance for infrastructure projects across a range of sectors including roads, power, airports, and ports,” said Mr. S.S. Kohli, Chairman and Managing Director, IIFCL. “India's infrastructure needs have been estimated at between US$ 100 -150 billion per year, with realizations well short of this target. Closing the shortfall is important not only because infrastructure limitations now are India's most serious constraint to growth, but also because they are India's most serious limitation to translating growth into rapid poverty reduction." Zagha added.
Continuing its 15 years support to the Powergrid Corporation of India, the country’s national electricity transmission company, the Bank also approved US$1 billion for the Fifth Power System Development Project. It is designed to help address India’s acute deficit of power. Almost half of Indian households (44 percent) do not have access to electricity. The loan will help Powergrid strengthen five transmission systems in the northern, western and southern regions of the country. This will facilitate the transfer of power from energy surplus regions to towns and villages in under-served regions of the country. The Bank has supported Power Grid since its inception, during which time the company has nearly tripled its transmission network to become one of the world's largest electricity transmission system operators.
“This loan will enable Powergrid to strengthen the existing transmission system as well as expand the Indian national grid which will help the Government of India achieve its objective of ‘Power for All by 2012’,” said Mr. S.K. Chaturvedi, Chairman and Managing Director, Powergrid.
The loans (Banking Sector and Powergrid) from the International Bank for Reconstruction and Development (IBRD) have a 30 year maturity including a 5-year grace period. The IBRD loan to IIFCL has a 28 year maturity including a 7.5-year grace period. # # #
For more information about these projects, please visit: http://go.worldbank.org/BID8YLZKI0 For more information on the Bank’s work in India: http://www.worldbank.org.in |
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