Mumbai: IL&FS Financial Services Ltd has tied up with state-owned Jammu and Kashmir (J&K) Bank Ltd to finance hydropower projects in Jammu and Kashmir, senior executives of the two institutions said.

The companies have identified nine hydropower projects with a total capacity of around 2,000 megawatts (MW), which need financing to the tune of almost Rs20,000 crore.

“We are proposing to conceive a joint venture between J&K bank and IL&FS Financial Services, which will undertake the responsibility of supporting the implementation of some of the identified hydel projects in J&K," said IL&FS Financial Services managing director and chief executive Ramesh C. Bawa.

According to Bawa, IL&FS will look at tapping the overseas markets, especially multilateral financing agencies for the purpose of financing these power projects.

“We do not want to depend very heavily on the domestic institutions, we will look to tie up with multilateral institutions for the funding," he said.

The partnership between the two institutions is expected to ease the major pain point of tying up financing for power projects in the state of J&K.

“J&K Bank has access to a certain domain and IL&FS brings in the skills of financing. If you combine the two, it will resolve a major problem for us in terms of financing of power projects. After you approve a power project it takes a year-to-year-and-a-half to get financial closure. We thought that if we could get going a certain structure whereby you could close it on day one and then given IL&FS’s own competence in down-selling the debt, we could actually speed up the whole process of putting in place a project," said Haseeb A. Drabu, minister for finance, labour and employment, Jammu and Kashmir.

J&K has around 20,000MW of unexploited power and a partnership like this could perhaps create a situation whereby J&K starts exporting power, he added.

Drabu added that the state of J&K is looking at various such partnerships to make the state more relevant in the Indian financial services sector.

“One of the reasons why we want to do this partnership is because we want to get J&K on the map of financial services. J&K Bank has played a stellar role in this but I think we need to get into relationships that actually bring us into the centre of the financial services sector in the country," said Drabu.

Financial institutions such as the state finance corporation, regional rural banks and co-operatives are being looked at under this plan.

“The larger effort is to create a sub-national financial architecture, because in the new emerging federal India, states will need to have their own financial architecture. We are trying to redesign the state finance corporation (SFC). In the new regime all SFCs have gone defunct. We have already made an open offer, bought out SIDBI (Small Industries and Development Bank) and others and now we are looking at a partner who can take 49% and we can revive that," said Drabu.