India?s $90-billion urbanisation project to build a Delhi-Mumbai industrial corridor will get a boost with the government plan to offer 26% in the venture to Japan. The government also plans to sell some equity in the Delhi Mumbai Industrial Corridor Development Corporation (DMICDC) to domestic public sector financial institutions like LIC.
Simultaneously, DMICDC?s initial equity will be raised to R100 crore from the current R10 crore. The corporation will run the trust fund into which the government, multilateral agencies and Japanese entities will invest to finance the city-building projects likely across decades. The offer follows the exit of Infrastructure Development Finance Company (IDFC) and Infrastructure Leasing & Financial Services Limited (IL&FS) from DMICDC.
A department of industrial policy and promotion official told FE that ?considering the $9-billion commitment from Japan, we will be giving 26% in DMICDC to Japan.? IL&FS and IDFC will transfer their combined 51% stake to government-owned financial firms making DMICDC a deemed government company. Currently, IL&FS holds 41%, IDFC 10% while the balance 49% is owned by the government in DMICDC.
As of now, the two major Japanese partners in the urbanisation venture are Japan External Trade Organisation and Japan International Cooperation Agency. The former has an MoU to collaborate with environment-related projects and transfer Japanese expertise in developing and promoting ?smart communities? (eco-cities) around the project area. Besides equity, Japan also brings its extensive experience in building industrial corridors to India.
The official said that the finance ministry?s financial services department will propose the names of domestic financial entity. ?LIC and HUDCO have shown keen interest,? he said.
DMICDC is a special purpose vehicle for the $90-billion project to build industrial enclaves along the Delhi-Mumbai rail corridor, spanning Delhi, Uttar Pradesh, Haryana, Rajasthan, Gujarat, Maharashtra and Madhya Pradesh.
IL&FS did not respond to an FE query, while an IDFC official said the company cannot respond ?as of now? since it had not received any proposal yet. The equity restructuring was done to avoid any clash of interest between participants later, he said.
According to the official, the trust fund of DMIC will be empowered to raise long-term debt at rates comparable with government paper from institutions and issue tax-free bonds. It will be administered by a board of trustees chaired by the DIPP secretary, with representatives from the departments of economic affairs, expenditure, planning commission, and the DMICDC chief.
