Infrastructure Current Affairs

India signs loan pact with AIIB for Rural Roads Project

India has signed a loan agreement with China led-Asian Infrastructure Investment Bank (AIIB) for financing of $329 million for Gujarat Rural Roads Project (GRRP).

 The objective of the GRRP is to improve the rural road connectivity and accessibility by providing all weather road connectivity to 1,060 villages in all the 33 districts of Gujarat, benefiting about 80 lakh people. It will also benefit the service providers such as public transport operators, hospitals, educational institutions, local markets and traders. 

About Asian Infrastructure Investment Bank (AIIB)

AIIB is a multilateral development bank backed by China, seen as a rival to the World Bank and Asian Development Bank (ADB). It was established to fund various infrastructure projects including energy, transportation, urban construction and logistics as well as education and healthcare in Asia-Pacific region.

The AIIB was officially established with 57 founding members and started to function in January 2016. But as of May 2017, the bank has 52 members. It has an authorised capital of US $100 billion. It is headquartered in Beijing.

Voting Share: China is the largest shareholder with 26.06% voting shares. India is the second largest shareholder with 7.5% voting shares followed by Russia (5.93%) and Germany (4.5%).

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India, ADB inks $220 million Loan Agreement for Rajasthan State Highways Investment Program

The Union Government and Asian Development Bank (ADB) have signed a $220 million loan agreement for improving connectivity as well as transport efficiency and safety on State Highways of Rajasthan.

The loan will be provided as the first tranche of the $500 million Rajasthan State Highways Investment Program, approved by ADB Board in May 2017. The Program will upgrade about 2,000 kilometers of state highways and major district roads to two-lane or intermediate-lane standards to meet road safety requirements.

Key Facts

Rajasthan State Highways Investment Program aims improve State Highways and major district roads in Rajasthan. It will enhance the capacity of the State public works department (PWD) in the areas of road asset management, road safety and project management.

One of the focus areas of the program is to attract private sector financing through government capacity building on public private partnership (PPP) development. ADB will finance part of the construction costs for the annuity-based PPP concessions and engineering procurement construction (EPC) contracts. It will also enhance the stability of contract regime, and ensure good governance during project implementation.

The first tranche loan will improve about 1,000 kilometres of State Highways and major district roads. It will have a 25-year term, including a grace period of 8 years. The loan will carry an annual interest rate determined in accordance with ADB’s London interbank offered rate-based (LIBOR) lending facility. The total cost of the project is $1.415 billion, of government contributing $465 million and $450 million from the private sector and other concessionaries.

About Asian Development Bank (ADB)

The ADB is a regional development bank which aims to promote social and economic development in Asia. It was established on 19 December 1966. It is headquartered in Manila, Philippines. ADB now has 67 members, of which 48 are from within Asia and the Pacific and 19 outside.

The ADB has been modelled closely on the World Bank. It has similar weighted voting system where votes are distributed in proportion with members’ capital subscriptions. As of 2014, Japan is the largest shareholder (capital subscription) of ADB having 15.7% shares followed US (15.6%), China (6.5%), India (6.4%), and Australia (5.8%).

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