India looks for funds from China-led AIIB

Cash-strapped govt needs money for major schemes

With the China-led Asian Infrastructure Investment Bank (AIIB) now open for business, the cash-strapped Government of India is now looking at the new lending institution as a potential source for funding some of its major projects.

Prime Minister Narendra Modi has asked the top officials to move fast to approach the AIIB for loans for some of the flagship projects of his government, particularly in agriculture, rural housing and railway sectors. The Ministry of Finance has accordingly asked the Ministry of Agriculture, Ministry of Rural Development (MoRD), Ministry of Water Resources and Ministry of Railways to prepare proposals to seek loans from the new bank, which is perceived as a counterweight to US-led World Bank and Japan-led Asian Development Bank.

According to a note being circulated by the Department of Economic Affairs within the government, Modi has asked the officials to seek AIIB fund particularly for Pradhan Mantri Krishi Sinchayee Yojana (Prime Minister’s Agricultural Irrigation Scheme) or PMKSY, rural housing programme and some projects in railway sector “on priority”.

The PMKSY, which is aimed at extending the coverage of irrigation, has been approved for implementation across the country with an outlay of Rs 50,000 crore over the next five years. 

For 2015-16, a total amount of Rs 5,300 crore has been earmarked for the project, combining allocations for the different schemes, which were amalgamated into it.

The agriculture ministry conveyed to the finance ministry that it would be in a position to seek the AIIB loan when the NITI Aayog would lay out the roadmap, possibly by the end of this month.  

Rural housingThe MoRD is finalising the guidelines of Pradhan Mantri Gramodaya Yojana, which envisages construction of 2.95 crore houses in rural areas over a period of seven years with the cost-sharing pattern between the central and state government being 60:40.

The estimated financing requirement at the Centre is Rs 1.83 lakh crore, the MoRD noted, adding that the huge funding gap of about Rs 1.13 lakh crore could be bridged with loans from the AIIB and other such lending institutions.

The railways is likely to seek funds from the AIIB for the proposed East West Corridor and East Coast Corridor, according to the DEA note.  

India is not only a founding member, but also the second largest shareholder of the AIIB, which has its headquarters in Beijing and opened for business on January 16 with a capital of $ 100 billion. A representative of India has been elected to the Board of Directors of the bank, which is expected to start approving loans by the end of 2016. Indian nominee D J Pandian has been appointed vice-president and chief investment officer of the new bank earlier this month.

AIIB president Jin Liqun, who earlier headed China International Capital Corporation, on January 11 had called on Modi in New Delhi.