Financially sound state entities can access direct foreign assistance

The Union Cabinet allowed financially sound state entities to borrow funds from Official Development Assistance (ODA) for financing infrastructure projects.  Explaining the decision of the Cabinet, Finance Minister Arun Jaitely hoped that the move will help to support vital infrastructure project at the state level.

Objective of the move

Enabling the state entities to directly access funds from official lenders like ADB will avoid the debt to enter into the book of the state government. On the other hand, a state government initiated borrowing is a budgetary exercise and will aggravate the revenue deficit problems. States generally are reluctant to do it as it will adversely affect their FRBM performance.

Following this policy, the Cabinet allowed Mumabi Metropolitan Region Development Authority to borrow directly from Japan International Cooperation Agency (JICA) for the implementation of the Mumbai Trans Harbour Link project, which is also known as Sewri-Nhava Sheva Trans Harbour Link. The project links Mumbai with Navi Mumbai has a length of 21.8 KM. Expected project cost is Rs 17854 crore and will be financed through direct borrowing.  

Several projects aimed to promote regional infrastructure promotion are on pending because of lack of funds. Fiscal constraints at centre and states and laggard in PPP models have made these m projects non-starters. Now, with direct borrowing, at least sound state entities can now bring money from overseas. 

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