DMIC loan set to go through before Abe visit

Written by Rajat Arora | New Delhi | Updated: Jan 14 2014, 10:26am hrs
Ahead of Japanese Prime Minister Shinzo Abes visit to India, the government has overcome its fears over the tied nature of the $4.5-billion Japanese Special Terms for Economic Partnership (STEP) loan for the Delhi-Mumbai Industrial Corridor (DMIC) project and is set to clear it soon.

Certain relaxations in the STEP loan conditions that Tokyo has agreed to make have made the task easier for the commerce and industry ministry, which has readied a Cabinet note suggesting approval of the Japanese loan, sources said.

Earlier, the finance ministry had expressed concerns over the condition that 30% of the goods and services for the DMIC projects will have to be from Japanese companies, as this could undermine the sanctity of the bidding process for procurement. The Japanese side has since relented and agreed to include in this 30% even goods and services from joint ventures in India in which Japanese firms have a 10% or more stake. This will allow more (non-Japanese) companies to participate in the bidding and make it more competitive.

According to the sources, the commerce and industry ministrys Cabinet note in this regard is likely to be cleared by the Cabinet before Abes visit. Abe is going to be the chief guest at the Republic Day ceremony.

The STEP loan will have a tenure of 40 years and will carry 0.1% interest, making it an attractive source of finance for the Delhi Mumbai Industrial Corridor Development Corporations ambitious R3,25,000-crore first phase.

The STEP loan, sources said, would not only cement relations between two countries but will also provide DMICDC with timely funds for the completion of the massive project.

Till now, DMICDC was only using funds released by the government.