States can now borrow from Official Development Assistance
Union Cabinet on Wednesday approved guidelines to allow financially sound states entities to borrow directly from bilateral ODA.
New Delhi: Union Cabinet on Wednesday approved guidelines to allow financially sound states entities to borrow directly from bilateral ODA (Official Development Assistance) partners for implementation of vital infrastructure projects. Mumbai Metropolitan Region Development Authority, a state government entity, was allowed to borrow directly from Japan International Cooperation Agency Official Development Assistance loan for implementation of Mumbai Trans Harbour Link (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. The norms will facilitate the state government entities to directly borrow from the external bilateral funding agencies subject to fulfilment of certain conditions and all repayments of loans and interests to the funding agencies will be directly remitted by the borrower.
The state government will have to furnish guarantee for the loan. Centre will provide counter guarantee for the loan. Currently, guidelines do not allow direct borrowings by the state government entities from external agencies. Presently, external development assistance from bilateral and multilateral sources is received by the Centre for projects/programmes in the Central sector, projects executed by Central PSU and on behalf of the state governments for local projects.