New Delhi: The government will decide on easing rules regulating foreign borrowings for the Delhi Mumbai Industrial Corridor (DMIC), as demanded by the Japanese government, before the probable visit of Prime Minister Manmohan Singh to Japan in November to attend the annual India-Japan Summit.

Japan, which has agreed to lend $4.5 billion (around 24,750 crore) to the ambitious Delhi-Mumbai Industrial Corridor project aimed at building industrial cities, has asked India to relax end use of external commercial borrowings for repayment of rupee loans and for working capital. This is currently barred by the central bank. It has also demanded easing restrictions on foreign currency borrowings from the head office or branch outside India, which will allow Japanese companies to bring in debt instead of equity into DMIC projects.

Seeking resolution: Trade minister Anand Sharma, during a recent meeting with his Japanese counterpart Yukio Edano requested that Japan expedite the process of equity participation in DMICDC. (Pradeep Gaur/Mint)

A second government official said the Reserve Bank of India has sought some more details. “I understand that we have reason to be optimistic about the early resolution of the issues," he said.

The DMIC project is likely to benefit from the proposed changes because of the large interest rate differential that exists between the two countries, said Manish Agarwal, executive director-infrastructure at the PricewaterhouseCoopers. “Allowing this will also help bring in more Japanese funds into Indian infrastructure projects," he said.

In August, the cabinet had approved giving 26% equity stake in Delhi Mumbai Industrial Corridor Development Corp. Ltd (DMICDC) to Japan in an attempt to ensure the nation’s commitment to the infrastructure project. India’s trade minister Anand Sharma, during his recent meeting with his Japanese counterpart Yukio Edano on the sidelines of ASEAN Economic Ministers meeting at Siem Reap, Cambodia, requested that Japan expedite the process of equity participation in DMICDC, preferably within the next 60 days, to accomplish the restructuring of DMICDC.

India also wants Japanese state-owned agencies—Japan Bank for International Cooperation (JBIC) and Japan International Cooperation Agency (JICA)—to look at the basic infrastructure requirements of the project in the initial stages of its implementation.

JBIC will lend $3 billion, while an additional $1.5 billion will be provided through official development assistance by the JICA to DMIC over five years.

DMIC proposes to develop self-sustainable, so-called smart cities on either side of the 1,483km-long western dedicated rail freight corridor between Dadri in Uttar Pradesh and Jawaharlal Nehru Port Trust in Navi Mumbai.

DMIC will run across six states—Uttar Pradesh, Haryana, Madhya Pradesh, Rajasthan, Gujarat and Maharashtra—and a majority of the projects in the corridor are envisaged to be implemented through public-private partnerships. It is billed as the largest infrastructure project in the world, with an estimated $90-100 billion required only to set up the infrastructure over the next 30 years.

The cabinet, in a 15 September meeting, had approved allocation of 17,500 crore over five years to provide assistance through debt or equity to the special purpose vehicles and for the development of trunk infrastructure in the industrial cities along the dedicated freight corridor. The cabinet also approved financial assistance of 1,000 crore over five years for further project development activities.

asit.mishra@livemint.com

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