The government has allowed state entities to borrow directly from bilateral Official development Assistance (ODA) partners like Japan International Cooperation Agency (JICA) for the purpose of implementing vital infrastructure projects. The decision will benefit important projects such as Mumbai trans-harbour link (MTHL). Besides, the Mumbai Metropolitan Region Development Authority (MMRDA), a state government entity, has also been allowed to borrow directly from JICA for implementation of MTHL project. The estimated project cost for MTHL is Rs 17,854 crore, out of which JICA loan portion is expected to be Rs 15,109 crore.
Under the new rules, the State government entities will directly borrow from the external bilateral funding agencies to fulfilment of certain conditions and all repayments of loans and interests to the funding agencies will be directly remitted by the concerned borrower. While state governments will furnish guarantee for the loan, the Centre will provide counter guarantee.
Nowadays, external assistance plays a supportive role in financing major infrastructure projects, social sector projects and in building up institutional capacity. The role of external assistance has increased further significance in view of the large gap in funding requirements for major infrastructure projects implemented by the State governments in order to acquire competitive strength under the globalized economic framework.