DMIC Summit - Financing - Part - 4

DMIC Summit - Financing - Part - 4

• 1.
  Financing Part 4 DMIC Summit– Developing Hub for Investors
• 2.
  DMIC Financing DMIC willbe an essential component of India’s future economic development. Implementation of DMIC Project requires huge investment for building up of infrastructure. It is envisaged that there will be primarily two categories of projects under the purview of state and central government agencies as: Category-1: Projects that can be implemented through Public Private Partnership (PPP Viable Projects) viz. Logistics Infrastructure, Power Plants, Ports and Airports, Special Economic Zones, industrial Parks, IT/ITES/Biotech, Hubs and Agro-Processing Hubs, Knowledge Cities, Integrated Townships; and Augmentation of selected National and State Highways.
• 3.
  DMIC Financing Category-2: OtherProjects (Non- PPP Projects) viz. Augmentation of rail linkages and development of connectivity to the identified investment regions/ industrial areas, Provision of requisite urban infrastructure, Augmentation of industrial areas, Provision of missing links and augmentation of state highways.
• 4.
  DMIC Financing DMICDC isthe overall in charge for development and execution of the project. The government of India owns 49% stake in the DMICDC, the Japan Bank for International Co-operation owns 26% and other government-owned financial institutions share the remaining 25% equity. The whole project spread over two phases is estimated to cost USD 100 Bn. Of this, USD 2-2.5 Bn is required for project preparation alone. For this purpose, a Project Development Fund (PDF) was created. This fund is used as a Revolving Fund and would specifically be used for undertaking project development activities viz. identification of projects, preparation of feasibility reports, detailed project reports (DPRs) etc and its cost would be recovered from successful bidders.
• 5.
  DMIC Financing To meetthe project implementation costs, DMICDC will raise funds, allocate funds and liaison between the Centre and six states. The land for the project will be acquired by the respective state governments and would be considered as the equity contribution of the State Government. The Indian government has earmarked an amount of Rs 17,500 crore as project implementation fund and Rs 1,000 crore as project development fund towards the DMIC project. The funds are released to the Special Purpose Vehicles (SPVs) formed between the State and the Central Government for each node being developed in the State at Rs 3000 crore per node. The amount spent as on Feb 2016 is Rs 2,008 crore and Rs 310 crore under Project implementation and Project Development Fund respectively.
• 6.
  DMIC Financing The amountsanctioned by the government under project implementation fund is mainly being used to build trunk infrastructure – non-profit-making but essential needs like sewage pipes, water supply and roads. Trunk infrastructure is expected to comprise about 35-40% of the project, which will be funded by the DMIC Trust, with the remaining project structured on a public private partnership (PPP) model. Typically, the land prices surge once the basic infrastructure such as roads, water and sewage pipelines, are built. This land can be sold at a premium to seek more funding for completion of the project.
• 7.
  DMIC Financing Apart fromthis, the Japanese government has also sanctioned a loan of USD 4.5 billion for the first phase of the project. This loan is available for a period of 40 years at a nominal interest of 0.1%. This facility will be available through a Special Terms for Economic Partnership (STEP) loan. This will bring Japanese funding, cutting edge technology and knowhow into projects implemented in DMIC, especially trunk infrastructure projects and transport connectivity projects which may not be commercially viable in their initial stages.
• 8.
  DMIC Financing However, thiswill meet only 10% of the funding requirement. A large chunk, approximately 90% of the funds will have to flow from the private players. Private sector investment is expected to come once the land prices rise post building of the basic infrastructure.
• 9.
  DMIC Financing g. ShendraBidkin Industrial Area (SBIA), Maharashtra SBIA is located at a distance of approximately 15 km from downtown Aurangabad and is 8 km east of the Aurangabad Airport. It is planned as a new industrial corridor extending from the existing Maharashtra Industrial Development Corporation’s (MIDC) Shendra Industrial Park to the town of Bidkin.
• 10.
  DMIC Financing h. DighiPort Industrial Area The total land available for development in the DPIA is around 253 square kilometers (after excluding forest and undulating terrain). It is meant to be a port, trade and industrial hub that will augment the existing port ad global hub.
• 11.
  DMIC Financing Some ofthe other options explored for funding DMIC have been mentioned below - a) Public-Private Partnerships (PPP) via Viability Gap Funding (VGF). VGF is a special facility to support the financial viability of those infrastructure projects, which are economically justifiable but not viable commercially in the immediate future. Financial grant up to to 20 percent of the project cost can be availed under this mode. VGFs are expected to be rendered by the Asian Development Bank (ADB) and World Bank, while loans will be provided to infrastructure companies by India Infrastructure Finance Company Ltd. (IIFCL).
• 12.
  DMIC Financing b) DMICDCcan also source funds from infrastructure financing companies like IFCL and HUDCO. Apart from this DMICDC can explore other options such as issue of land and infra bonds, sovereign funds and external commercial borrowings c) Funding from Multilateral Agencies such as Asian Development Bank and World Bank. World Banks has already evinced interest in funding DMIC. World Bank provides funds for major infrastructure projects at very nominal rates and also follows very high standards in project execution. Ensuring adequate availability of funds for implementation of DMIC will require support from various stakeholders- state, central government agencies and private investors (domestic and overseas)
• 13.
  THANK YOU Email: [email protected]Call Us: +91 124 4754550 www.resurgentindia.com Read full report on: http://blog.resurgentindia.com/empowering-msmes-role-of-banks- financial-institutions-it-skill-development-rating-agencies/