Manila, Dec 23, 2005 AEST (ABN Newswire) - The Asian Development Bank (ASX: ATB) has set up a US$750 million financing facility to assist the Indian Government's nationwide rural roads program.
Rural road investment is one of the key features of the Government's poverty reduction agenda for the rural sector nationwide. The Government's rural roads investment scheme - Pradhan Mantri Gram Sadak Yojana (PMGSY) - aims to provide all-weather road connections to currently unserved villages in rural areas, where about 70% of the population lives.
Now in its fifth year, this scheme has improved 66,000 km of rural roads and another 47,000 km are nearing completion. It also has strengthened state level agencies to carry out the scheme.
Latest estimates for the overall financing requirements are about $30 billion. Although some funds are available through excise taxes and aid agencies, including ADB and the World Bank, the funding gap is huge. Therefore the Government has requested further assistance from ADB.
The Multitranche Financing Facility, a new ADB financing modality, will be used to finance investments in these PMGSY states, for construction/upgrading of up to 30,000 km of rural roads connecting about 19,000 villages. To ensure success, the facility will also assist in planning, design, operation of the infrastructure, and in safeguards, road safety and road maintenance.
"As so many state level agencies have different levels of capacity to absorb donor funds, flexible financing arrangements are needed that allow fund allocations on the basis of progress achieved and readiness for new investment in each participating state," says Hideaki Iwasaki, an ADB Project Specialist.
Funds from the facility will be provided over the next five years as multiple loans, each financing a clearly defined investment project. Some 3,200 km of rural roads - about 1,000 km each in Assam and West Bengal and about 1,200 km in Orissa - will be tackled in the first stage. The remaining projects will be prepared by participating states in three annual batches.
The total cost of the investment program is estimated at about $2.1 billion. ADB's financing facility, accounting for 36% of the total, is funded from ADB's ordinary capital resources. Financing made available will be subject to interest that will be determined in accordance with ADB's LIBOR-based facility.
"Although the immediate result of the program will be better roads, the long term aim is to reduce poverty and deprivation and bring jobs, economic opportunities, and services closer to those presently living in hard to access areas of rural India," Mr. Iwasaki adds.
The Ministry of Rural Development and the governments of the participating state are the executing agencies for the investment program.
Contact
Omana Nair
Email: onair@adb.org
Tel:+632 632 5178; +63 917 855 2085
Graham Dwyer
Email: gdwyer@adb.org
Tel:+632 632 5253; +632 898 3413
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