Modifying the rule of direct borrowings by the state government entities from external agencies, in view of huge funding requirements for major infrastructure projects, the government has allowed financially sound state government entities to seek loans directly from bilateral Official development Assistance (ODA) partners. The concerned State Government will furnish guarantee and the Government of India will provide counter guarantee to obtain the loan. State government entities will include any authority, public sector undertaking or organisation of the state.
As per new guidelines, state government entities having annual revenue of more than Rs 1,000 crore in the three previous years for infrastructure projects of over Rs 5,000 crore can obtain loan. Besides, the project should have regular revenue stream and the revenues to be generated from the project should be enough for repayment of principal amount and interest. The revenues from the project would be escrowed to the extent of payment of principal and interest from time to time.
Besides, the state entities can directly approach bilateral agencies and the funding would not fall under state FRBM target. The proposed move will help state government entities in implementing projects having huge financial requirements which otherwise would have been faced fund crunch despite being viable.