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State unfit for Japanese loans: Centre
The state of West Bengal's finances makes it unfit for foreign loans. According to Union finance ministry documents accessed by HT, of the eight states that had applied for Japanese loans, West Bengal is the only one whose proposal has been shot down on grounds of weak financial health, putting in jeopardy its power sector growth.
The state of West Bengal's finances makes it unfit for foreign loans. According to Union finance ministry documents accessed by HT, of the eight states that had applied for Japanese loans, West Bengal is the only one whose proposal has been shot down on grounds of weak financial health, putting in jeopardy its power sector growth.
The other states that applied were West Bengal, Uttarakhand, Tamil Nadu, Manipur, Andhra Pradesh, Kerala, Himachal Pradesh and Madhya Pradesh.
"Since the state is highly debt-stressed, the DoE (department of expenditure) does not agree to pose this project for JBIC (Japan Bank for International Cooperation) funding," wrote deputy director Deena Nath, department of expenditure (DoE), union finance ministry, while rejecting the debt proposal for the 600 MW sixth unit of the Bakreshwar thermal plant on April 13, 2010.
In contrast, the DoE rejected none of the 11 projects put forward by the other seven states, as none of these were "highly debt stressed" like West Bengal.
The JBIC (now renamed JICA) is one of the overseas funding agencies, such as the World Bank and Asian Development Bank that offer long-term loans for development projects in India. All state governments covet these loans as they can be paid back over long terms (typically 20-25 years) and carry low interest rates (4-5%).
While rejecting West Bengal's application, the high share of the tax revenue that it spends to pay interest on past debts has been cited as a reason.
"West Bengal is facing a power famine over the next few years and desperately needs investment. This unit needed funds to the tune of Rs 2,850 crore and the Japan Bank for International Cooperation could have funded 85% of the amount," said a state government official familiar with the developments.
The JBIC had earlier funded five units (210 MW each) of the Bakreshwar thermal power plant and was also initially interested in funding the 600 MW unit. "They had visited the site too. But the state's financial crisis did us in," said a power department official.
The Bakreshwar case represents the tip of the iceberg. "Different projects of the transport, environment, health, power, urban development and municipal affairs departments are languishing as none would lend to West Bengal. The cumulative funds these projects could have otherwise got are to the tune of Rs 25,000-30,000 crore," said a senior bureaucrat in the state.
