Union Minister Nitin Gadkari has said using external borrowings to finance projects is a gamechange.r
India's major ports and state-run shipping entities may take Rs 50,000 crore loan in dollars at a low interest rate to augment infrastructure, Union Minister Nitin Gadkari said.
In an agreement between Jawaharlal Nehru Port Trust, State Bank of India and Singapore's DBS bank, the government has approved External Commercial Borrowings of up to 400 million dollars for upgrading infrastructure. More significantly, this will pave the way for other major ports to ink similar agreements.
"External borrowings in ports will increase capital available to the infrastructure sector. The Jawahar Lal Nehru Port Trust agreement has paved the way for our ports and shipping entities to take loans in dollars with low interest rates, which would in turn enhance the viability of projects."
Mr Gadkari said that the rate of External Commercial Borrowings is only 2.024 per cent, and along with Libor rate it comes to about 3.15 per cent, making it much cheaper than any other loan in rupees. The external borrowings route opens up more avenues for major government infrastructure projects which can now access international markets to finance projects.
"Loans in dollar terms at 3 per cent interest would reduce our project costs as there will be a saving of interest of 8 per cent. Cost of our construction will reduce and economic viability of projects will increase. We are planning to use the financial strength of our ports to develop inland waterways," Mr Gadkari explained.
Mr Gadkari said external borrowings of 400 million dollars by the Jawaharlal Nehru Port Trust will be used to improve the infrastructure required for doubling its existing capacity. The external borrowings comprising 300 million dollars from the State Bank of India, and 100 million dollars from Singapore's DBS bank will be primarily utilised by the port trust, which has US dollar denominated foreign currency earnings that can be leveraged for a low cost foreign currency borrowing, for expansion of existing roads network.