The Delhi-Mumbai Industrial Corridor, which promises to be the lynchpin of industrial, urban and infrastructural development in the western hinterland of the country, may miss the 2018 deadline by a mile. Apart from land acquisition, financing problems have now emerged as the Japanese partners seem increasingly concerned about the Indian government's implementation capabilities.
Woes for the snail-paced Delhi-Mumbai Industrial Corridor (DMIC) continue, as fresh problems in financing have emerged. The Corridor faces land acquisition problems in Manesar, environmental problems near the southern tip near the Jawaharlal Nehru Port (because of which the Corridor is now truncated). But more importantly, new norms by the government may be deterring Japanese investors and banks.
Japanese banks would like to lend to companies from their country at near-zero interest to encourage the Japanese (especially manufacturing) industry to establish units along the Corridor and provide a shot in the arm of the Japanese manufacturing economy overall. On the other hand, the Indian finance ministry is arguing that such preferential treatment is anti-competition.
Japanese banks Japan International Cooperation Agency (JICA) and Japan Bank for International Cooperation (JBIC), partners to the Corridor, want to offer "tied aidö through Special Terms for Economic Partnership (STEP) of Japanese Official Development Assistance Loans. These loans will have a long tenure of 40 years and will carry 0.1 per cent interest. Governments that avail of the loan have to ensure that at least 30 per cent of the goods procured have a link with Japan, with consulting work not included in this.
The commerce and industry ministry estimates that the Corridor will require funding of $4.5 billion to facilitate building new cities and other infrastructure.
Shin Oya, the country representative of JBIC, refused to answer direct questions on DMIC funding, but said that the bank is now seeking to fund other private projects in India. Oya said that participation and welfare of Japanese companies would be a priority for JBIC while funding the DMIC or other projects: "We support projects in which Japanese companies are involved.
Therefore, an investor-friendly climate for infrastructure is the most important element. The Delhi-Mumbai Industrial Corridor (DMIC) is an important initiative between Japanese and Indian governments, and we would like to support this initiative as much as possible.ö He hinted that that could change: "Going by the current market conditions, at present our focus is on investing more in private projects. If situation improves, we would like to go into investing more in PPP projects." Highly ranked officials at a related ministry, on conditions of anonymity, told us that with "not a single stone having been laid so farö along the Corridor, it has no chance of meeting its completion deadline of early 2018. Too much confusion persists, the source said.
On land acquisition, Oya said it would dampen investor spirits: "Usually, foreign investors, including Japanese investors, do not have a comparative advantage for acquiring land. The negative effect of the new [land acquisition] law on foreign lenders could be larger than that for domestic lenders.ö Our attempts over two months to reach the normally accessible Amitabh Kant, the CEO of the DMIC Development Corporation, have met with firewalls.
Now, Japanese Official Development Agencies (ODAs) have shown keen interest in funding some of the key private projects in India and facilitate Japanese companies to set up their bases here. These projects include industrial parks, seawater desalination, recycling and management zones, concentrated solar power, transmission with smart grid and the Ahmedabad-Dholera metro rail, industrial park in Haryana, smart water treatment system, high-efficient gas firing combined cycle power project, gas-fired IPP project and a light rail transit system in Maharashtra, electricity for Neemrana Industrial Park, treated water conveyance system in Rajasthan, water supply from Narmada to Pithampur industrial park in Madhya Pradesh, and connectivity to Dadri-Noida-Ghaziabad region.
In the southern region, the financial institutions are active in improving ports, roads, bridges and industrial parks, electricity and water supply in Ennore [Chennai] and other adjoining areas, and monitoring the progress of Tamil Nadu Investment Promotion Programme.
- Shashidhar Nanjundaiah