Asian Infrastructure Investment Bank is considering a proposal to finance a power transmission and distribution upgrade programme in Assam, according to D.J. Pandia, Vice President and Chief Investment Officer, AIIB. Pandian was recently addressing a media briefing in Mumbai.
Pandian explained that a concept for setting up power transmission lines and for power grid strengthening in Assam has been approved by the AIIB board. The project appraisal is currently underway.
Once done, the process of sanction and disbursement will begin. The AIIB CIO indicated that the quantum of financing would be in the region of $400 million, which will be made in two phases. This financial assistance is being given to project implementing agency Assam Power Distribution Company Ltd, the state-government power distribution utility. In the first phase, an assistance of $250 million is likely to be made.
AIIB has three focus areas—transport, energy and water, Pandian indicated. Within energy, AIIB is looking largely at clean energy (renewables) as well as power T&D. AIIB has lent to Power Grid Corporation of India, the Central transmission utility of India, for transmission schemes connecting the Eastern Grid and the Southern Grid. Out of the total project cost of $303.47 million, AIIB’s lending was $100 million.
Meanwhile, AIIB in October this year, approved a loan of $75 million to Tata Cleantech Capital Ltd, a leading financier of renewable energy in India. The Tata Cleantech Sustainable Infrastructure On-Lending Facility project aims to increase private capital investment in renewable energy, power transmission and water transmission.
Pandian observed that lending by AIIB is usually long-term, with a tenure of around 30 years. This is why it is different from conventional banks that do not have such long-tenure loans. Besides, AIIB is protected by Indian sovereign guarantee to its loans, as the Government of India is involved at each step of the project assistance.
India is the second-largest investor country in AIIB but the largest borrower, explained Pandian adding that over the past four years, AIIB’s investments in India have grown exponentially. India currently has a 30 per cent share in AIIB’s total loan portfolio. By 2025, AIIB has targeted to approve assistance worth $10 billion annually, in which India is expected to maintain its share of 30 per cent. AIIB commenced its operations in India in 2016 and has contributed to 13 projects with an overall exposure of $2.9 billion.
India has a huge potential for infrastructure development, noted Laurel Ostfield, Director General & Spokesperson, AIIB, who was also present at the press briefing. Investing 8 per cent of the country’s GDP in its infrastructure is considered as a good benchmark. However, in India, this metric is around 5.8 per cent, implying immense potential for investment.
Featured photograph shows Laurel Ostfield – Director General & Company Spokesperson, AIIB (left) and D J Pandian, VP & Chief Investment Officer, AIIB, addressing the media in Mumbai on November 15, 2019.
