India signs loan agreement with ADB to support India Infrastructure Finance Company

India and the Asian Development Bank (ADB) on Friday signed a $300-million loan agreement to support state-run India Infrastructure Finance Company Ltd (IIFCL) that provides long-term finance to infrastructure projects.

The multilateral lending agency signed two other deals with the Central government. The ADB will lend $169 million to develop water and sanitation services in Tamil Nadu and $105 million to support hydropower transmission in Himachal Pradesh.

"The (IIFCL) project will enhance the availability of long-term finance for PPP projects, improve operational capacity of IIFCL and expand the portfolio of infrastructure financing instruments available to IIFCL," Additional Finance Secretary Sameer Kumar Khare said.

Khare, who signed the loan agreement on behalf of the Indian government, said the loan is expected to complement the government's infrastructure building efforts, the Finance Ministry said in a statement.

ADB India Resident Mission Country Director Kenichi Yokoyama said it is expected to fund at least 13 sub-projects through IIFCL involving roads and renewable power generation.

The $300-million loan, which is the last tranche, is likely to help catalyze the financial closing of $2.4 billion in investments, the Ministry said. The attached technical assistance will support IIFCL's capacity development and focus on its financial management, among others.

The ADB also signed to lend $169 million to develop climate-resilient water supply, sewerage and drainage infrastructure in at least 10 cities in Tamil Nadu.

The first tranche, of a $500-million multi-tranche financing facility, will target Chennai, Coimbatore, Rajapalayam, Tiruchirappalli, Tirunelveli and Vellore.

"The state has faced recurring droughts and erratic monsoons in the recent past resulting in severe water scarcity and urban flooding. ADB's support will help address these complex urban challenges through innovative and climate-resilient investment," Khare said.

Further, the ADB also committed to lending $105 million to continue financing the transmission system upgrades in Himachal Pradesh for increased supply of hydropower to the state and the national grid.

This is the third tranche of the $350-million financing facility for Himachal Pradesh Clean Energy Transmission Investment Programme approved by the ADB Board in 2011.

(With inputs from agencies.)