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Limit foreign borrowings to hi-tech, export potential projects...

A recent report suggested that funding agencies such as Japan International (JICA) had refused to extend loans for the construction of stormwater drains by Chennai Corporation, impacting projects in Thiruvottiyur, Manali and Madhavaram that involve investment of around Rs 1800 crore; also dropping plans altogether for some other neighbourhood projects.  

For long, multilateral lending institutions like the World Bank, IMF and bilateral donors like the KfW of Germany and JICA had traditionally been extending long term funding on soft terms for the development of such civic projects. Priorities have been changing for bilateral lenders, who now fund to more technology-oriented projects that would be of benefit to their industries. For instance, Japan International Cooperation Agency (JICA) has been extending large credit on soft terms for railway projects: Rs 10,000 crore for Chennai metro rail and Rs 3200 crore for the metro’s intelligent transport system. The bullet train project connecting Mumbai and Ahmedabad is to receive funding to the extent of Rs 88,087 crore.

The issue of borrowing huge sums for civic projects with no scope for foreign exchange earnings, requires re-think. Civic services are essentially offered by municipal corporations. But most corporations are run inefficiently with inadequate attention to resource mobilisation, sloppy execution of projects, leakages of revenues, delays, cost overruns and poor quality of works. Steep fall in the value of the rupee in relation to the dollar, euro or yen adds further insult to injury. The civic projects that do not generate revenues in foreign currency suffer the most by the depreciation of the rupee.

India, in terms of size, is expected to be the third largest in the next few years. The country has been extending handsome loans to several developing countries in Asia and Africa. It should strive to limit seeking funds from foreign institutions for meeting essential needs relating to technology upgradation, import of raw materials in short supply, capital equipment and the like and not for projects for which the country itself has indigenous capabilities. Simultaneously, there should be the striving for achieving self-sufficiency or near self-sufficiency in areas such as energy. The record  of the US over the last 20 years in achieving self-sufficiencies in oil and gas is worth emulating.

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