AIIB To Lend $500 Million For Mumbai’s Suburban Railway Network

The Asian Infrastructure Investment Bank will lend $500 million to India for the construction of road and railway corridors in Mumbai, in line with its strategy to ramp up investments in the country.

The funds will be used to extend the existing Virar-Dahanu Road corridor of 68 kilometres to provide commuters, who live within local areas, better access to the suburban railway system, the Beijing-based financial institution said in a media statement. The loan, it said, will also be advanced to construct a 28-km new railway corridor between Panvel and Karjat localities of Mumbai.

With this loan, AIIB will fund a four-lane highway to be constructed on the Virar-Dahanu corridor and a two-lane highway between Panvel and Karjat as part of the third phase of the Mumbai Urban Transport Project. That, according to AIIB, has a total cost of around $997 million.

AIIB has been providing loans to public sector projects based on the prevailing London Inter-Bank Offered Rate plus 75-140 basis points, Vice President and Chief Investment Officer DJ Pandian said at a press conference on Friday. But the interest rate on the $500-million loan will depend on its maturity and structure, which is yet to be finalised by the Maharashtra State Road Development Corporation Ltd, he said.

“We can provide the loan up to a maturity of 35 years, including the grace period. But according to the MRDC's requirements, it prefers loans for a 20-year period,” he said.

Pandian said 50-60 percent of the land for the two corridors has been acquired by the authorities. As soon as they acquire 90 percent of the required land, the project can start being implemented, he said. “We can reimburse MRDC for up to 20 percent of the work they are doing.”

AIIB will also ensure that the project has control measures on 36 priority sections of existing lines to reduce fatal accidents, including track segregation by fencing or using reinforced concrete walls and pedestrian crossings over or under the tracks, its media release said.

The project, Pandian said, has been designed to create modern railway stations, which will be a “unique model” for the rest of India. “We have a result framework, according to which the project will be implemented.”

Other Investments

AIIB will lend $75 million to Tata Cleantech Energy Capital for on-lending purposes. That's aimed at increasing private capital investments in renewable energy, power transmission and water infrastructure.

The bank has also made a $50-million investment in Oriental Structural Engineers Pvt. Ltd.—one of the sponsors of Oriental InfraTrust, a roadways-focused infrastructure investment trust—as part of its recent private placement round, Rajat Misra, manager (investment operations department) at AIIB, told BloombergQuint.

AIIB, in its close to four-year tenure, has funded 55 projects worth $10 billion across the world. India-based projects accounted for 30 percent of the investments, making it the largest borrower from the multilateral development bank. Overall, AIIB has funded 13 projects in the country worth $2.9 billion. Projects in Mumbai alone, Pandian said, received about $1 billion in funding.

AIIB targets $10 billion in annual funding for projects across the world by 2025, from an annual target of $4.5 billion at present.