Apprehension of Japan pulling out from the Delhi Mumbai Industrial Corridor (DMIC) project has forced the government to put off a decision to subsume the DMIC Development Corporation (DMICDC) and the DMIC Project Implementation Trust within the proposed National Industrial Corridor Development Authority (NICDA).
Also, the government’s plan to get a new law — the NICDA Act — made on the lines of the National Highways Authority of India Act for legislative certainty and to ensure greater transparency regarding aid/grants from overseas bodies has been put on the back burner.
The rationale behind the move is that these would delay the ground work (including master planning and studies) for the other four proposed corridors — Amritsar-Kolkata, Visakhapatnam-Chennai, Chennai-Bengaluru and Bengaluru-Mumbai. India and Japan had agreed on a $9-billion fund with equal contribution from both sides as initial investment in the $90 billion DMIC project.
Subsuming DMICDC and DMIC Trust within NICDA at this stage would have meant more discussions with Japan and complications in finding a way to transfer the 26% stake of Japan Bank for International Cooperation (JBIC) in DMICDC to NICDA on a proportionate basis, especially when more discussions are needed on the NICDA equity structure, official sources told FE. Any misunderstanding at this crucial stage could scuttle the DMIC project and
Japan losing faith in making huge investments in India, they added.
The other stakeholders in DMICDC are the government, Hudco, IIFCL and LIC.
There were already some protracted differences when the finance ministry had taken up the issue of low-cost and long-term Japanese funding (the $4.5 billion-Special Terms for Economic Partnership loan with 0.01%-0.2% yearly interest and a repayment period of 30-40 years) having many riders.
This included a clause that 30% of goods and services for projects in DMIC should be from Japanese companies. The finance ministry had pointed out that the clause would make bids for the projects non-competitive.
FE had reported that the Japanese government, to expedite the DMIC project, had then agreed to relax the conditions for the STEP loan with a specification in the rules that 30% of goods and services can also be from joint ventures in India where Japanese firms have a shareholding of 10% or more. This was to facilitate bidding from more non-Japanese firms.
The sources said a Cabinet note on NICDA, which will be taken up by the government probably next week, has left out an earlier provision that since the NICDA is proposed to be the sole body overseeing the development of all corridors across the country, it should supersede the extant DMICDC and the DMIC Trust.
The government had given its ‘in-principle’ approval to the DMIC project outline in August 2007 itself and work has progressed much ahead of all the other four recently conceptualised corridors.
Therefore, the government has decided to postpone the decision to subsume the DMICDC and Trust within the NICDA as well as for a separate law (NICDA Act) till work in other corridors catches up or at least come to a satisfactory level when compared to DMIC project, the sources said.
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