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Indian Projects Discreet Beneficiaries of AIIB Belt and Road Funding

Although officially cynical as to the aims of the BRI, India is a major recipient of related infrastructure funding.

Photo: The Madhya Pradesh road network: Urgent AIIB-backed upgrade underway.
The Madhya Pradesh road network: Urgent AIIB-backed upgrade underway.
Photo: The Madhya Pradesh road network: Urgent AIIB-backed upgrade underway.
The Madhya Pradesh road network: Urgent AIIB-backed upgrade underway.

While some have expressed surprise that Mumbai was the setting for last month's third annual meeting of the Beijing-headquartered Asian Infrastructure Investment Bank (AIIB), the choice was wholly in keeping with both the body's long-term agenda and its more recent track record. For more than a year now, India – despite its public protestations of concern over the apparent political intent behind the Belt and Road Initiative (BRI) – has been partnering with China in order to fund a number of its infrastructure projects, with the AIIB the primary investment vehicle.

It is also worth remembering that, after China, India is the AIIB's second-largest shareholder, as well as, of late, one of its key beneficiaries. Of the US$5.3billion in loans signed off by the AIIB, nearly a quarter of that sum – around $1.3 billion – has been allocated to India-based projects.

Opening proceedings on 25 June, Jin Liqun, the former banker and academic who now serves as the AIIB's President, made clear the links between the institution and the BRI programme, saying: "In addition to our formal partnerships, our members are involved in a wide range of regional infrastructure and trade arrangements, with the BRI being a prime example."

He later amplified his comments at the 2 July Forum on Belt and Road Legal Cooperation. Addressing delegates at the Beijing-hosted event, he said: "To my mind, all AIIB-backed projects are connected with the Belt and Road Initiative."

Of the 28 projects so far approved by the AIIB, seven are located in India, with a further five such initiatives in the pipeline. Among those already in place are two India-specific infrastructure funds and five developments seen as hugely BRI-friendly.

Of the funds, the National Investment and Infrastructure Fund Phase I – as approved on 24 June this year – is a $700 million undertaking co-financed with the Indian Government. Overall, the AIIB has put up $100 million as a means of addressing the equity funding gap that is currently bedeviling a number of Indian infrastructure projects. The other fund, the North Haven India Infrastructure Fund, is a private equity fund, overseen by Morgan Stanley, with a remit of raising between $750 million and $1 billion, with the AIIB committed to putting in up to $150 million.

The most recent initiative to secure AIIB approval is the Madhya Pradesh Rural Connectivity Project, a $502 million upgrade to the road network in Madhya Pradesh, India's second largest state and one of its poorest. The project will enhance the connectivity of 1.5 million people living in 5,640 villages throughout the state, while giving them improved access to education, health and retail facilities.

A major undertaking, the project will require the surface-sealing of 10,000km of existing roads and the construction of 510km of wholly new roads. The project will also put in place the civic support structures required to manage and maintain this upgraded road network. In order to deliver on this, the AIIB has agreed to provide $140 million of funding, with the World Bank putting in an additional $210 million and the Indian Government making up the balance.

The AIIB has also signed-off on $329 million in funding for the Gujarat Rural Roads (PMGSY) Project, an initiative it is co-funding with the Government of Gujarat. A further two projects have seen AIIB funding earmarked for upgrading India's electricity transmission facilities. This has seen the bank agree to provide $160 million of funding for the Andhra Pradesh 24x7 Power For All Project. Co-financed with the International Bank for Reconstruction and Development and the Government of Andhra Pradesh, this will facilitate a major upgrade for the state's electricity transmission network.

The AIIB is also to commit $100 million to a Transmission System Strengthening Project in Tamil Nadu, India's 11th largest state. This initiative is to be co-financed with the Asian Development Bank and India's Power Grid Corporation.

The final project – the AIIB's largest undertaking in India – is Line Six of the Bangalore Metro Rail Project. With the bank committed to providing $335 million of the estimated overall $1.785 billion cost, the project will involve a 22km extension to the city's existing metro system and the construction of 18 new stations. The co-financers in this particular project are the European Investment Bank and the Indian Government.

Geoff de Freitas, Special Correspondent, Mumbai

Content provided by Picture: HKTDC Research
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