ADB extends $300-mn loan to India for road connectivity in Bengal-NE region

27 Mar 2015

The Asian Development Bank (ADB) has extended a $300 million loan to India as the first tranche of a $500 million regional lending programme for improving road connectivity in the Bengal-North Eastern region for increasing domestic and regional trade along the North Bengal-North Eastern Region (NER).

The project will improve road connectivity and efficiency of the international trade corridors by expanding roads in NER of the country.

ADB and the government of India on Thursday signed the agreement for a $300-million loan with a 25-year repayment term, as the first tranche of a $500 million multi-tranche South Asian Sub-regional Economic Cooperation (SASEC) Road Connectivity Investment Programme.

Under this programme, about 500km of roads will be constructed. SASEC is an initiative to promote economic cooperation between Bangladesh, Bhutan, India and Nepal.

ADB's loan of $300 million makes-up nearly 71 per cent of the total project cost of about $425 million, with the central and state governments providing counter-party finance of about $125 million. The 25-year repayment term of the loan includes a five-year grace period with an annual interest rate determined in accordance with ADB's LIBOR-based lending facility.

The first tranche will be used to construct two national highways totalling about 150 km in West Bengal and state roads totaling about 180 km in Manipur, extending to Myanmar and is expected to be completed by December 2021.

SASEC is an initiative to promote economic cooperation between Bangladesh, Bhutan, India and Nepal.

In 1996, these four South Asian neighbours formed the South Asian Growth Quadrangle (SAGQ) with the primary objective of accelerating sustainable economic development among them.

This sub-regional initiative was endorsed at the South Asian Association for Regional Cooperation, or SAARC, summit in Malé in 1997. Subsequently, these four countries requested ADB's aid in facilitating their economic cooperation initiative. This request led to the implementation of the SASEC programme.

Intra-regional trade in South Asia is only 2 per cent of the total trade, as compared with 25 per cent in the Association of Southeast Asian Nations, or Asean, and 40 per cent in North American Free Trade Agreement countries and 63 per cent in the European Union.