AIIB Covid-19 fund bolsters support for Indian rail and road infrastructure
Other multilateral development banks to co-finance Chennai metro rail project
11 Nov 2020 | Michael Marray

Transport infrastructure in India has emerged as one of the biggest recipients of loans under the Asian Infrastructure Investment Bank's (AIIB) Covid-19 Crisis Recovery Facility (CRF). The country had grown to be the biggest recipient of AIIB funding as of last year, and its share of the overall loan book is likely to grow further via the CRF. which the AIIB is conducting both via standalone loans and in co-operation with other multilateral development banks.

One project currently under preparation is the Chennai Metro Rail Phase 2 Project (Corridor 4), which aims to provide high capacity and efficient east-west connectivity through the centre of Chennai. The AIIB has approved a US$356 million sovereign loan to partially support the construction of 16 kilometres of elevated viaduct, 18 elevated stations, and the construction of seven underground stations. Other components of the project, including the underground section, depot, rolling stock and system, will be financed by parallel co-financiers and the government of Tamil Nadu.

The AIIB is considering co-financing with the Asian Development Bank (ADB) and the New Development Bank (NDB), the latter controlled by the BRICS countries (Brazil, Russia, India, China, and South Africa). Last year was the fourth full year of the NDB’s operation and it was marked by the approval of 22 projects from all member-countries of the bank amounting to US$7.1 billion. Total approvals of NDB lending reached US$15.1 billion, with a loan portfolio spanning transportation, water, clean and renewable energy, environment and education.

Corridor 4 is closely related to the Chennai Metro Rail Phase 2 Project - Balance Corridor 5, for which the AIIB has already approved a sovereign loan. This proposed project involves north-south mass transit connectivity through Chennai. The AIIB financing for the Balance Corridor 5 supports the construction of 26 kilometres of elevated viaduct and 24 elevated stations, and provision of related equipment and facilities.

Other components of the project, including traction and power supply, track work, and telecommunications, are to be financed by the ADB. Other aspects, such as signaling, lifts and escalators, as well as land acquisition, are to be financed by counterpart funds from the government of Tamil Nadu.

The total project cost is expected to reach US$708.64 million, with AIIB financing US$438.75 million, Tamil Nadu contributing US$155.88 million, and the ADB pitching in US$114.1 million.

The US$13 billion CRF was approved in the early part of the coronavirus pandemic, and the AIIB Board has so far approved 22 projects amounting to US$6.645 billion.

Also in India, the Haryana Orbital Rail Corridor Project will provide a new freight and passenger railway line to improve regional connectivity and reduce congestion in the Delhi National Capital Region. The project involves a 144-kilometre, dual-track, electricity-run railway line with 14 stations. Components to be financed via a US$400 million AIIB loan include tunnels, bridges, embankment, stations, signaling, and land acquisition.

The AIIB has also approved a US$359 million sovereign loan for the Maharashtra Multi-Modal Corridor Package III Project, which will expand and improve the capacity and efficiency of the road transport network in the Mumbai Metropolitan Region. The project consists of the construction of 24.5 kilometres of toll expressway, including interchanges. The main carriageway will be four lanes in each direction. The AIIB is also co-financing the Mumbai Metro Line 5 Project, including the provision of rolling stock and systems, and depot machinery and plant for a separate project under implementation by the Mumbai Metropolitan Region Development Authority. The elevated line will run 24.7 kilometres with 17 stations.

This project will be co-financed with OPEC Fund for International Development (OFID). The AIIB will be the lead co-financier, lending US$436 million. OFID is a multilateral development finance institution established in 1976. Its 12 member-countries are Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela. 

Outside of the CRF, the AIIB is already supporting the Delhi-Meerut Regional Rapid Transit System via a US$500 million sovereign loan. The project involves the development and construction of an 82-kilometre rapid transit system which connects Sarai Kale Khan in Delhi to Modipuram in Meerut, Uttar Pradesh.

The project will be jointly co-financed with the ADB under its Multi-tranche Financing Facility comprising four tranches. Financing for the project will be implemented in four tranches between August 2020 and May 2025. The Indian government will provide US$1.89 billion and co-financiers are expected to provide US$1 billion of the total project cost of US$3.94 billion. 

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