New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved the first extension of Concessional Financing Scheme (CFS) to support Indian Entities bidding for strategically important infrastructure projects abroad for five years till 2023.
“Under the CFS, the Government of India has been supporting Indian Entities bidding for strategically important infrastructure projects abroad since 2015-16. Since the objectives of the Scheme continue to be relevant, it is proposed to extend the Scheme for another five years from 2018 to 2023,” read a statement on behalf of the Cabinet.
In the five-year period, the financial implications towards payment of Interest Equalisation Support (IES) for the existing projects will be about 96 million dollars or Rs 625 crore.
The scheme envisages the government to provide counter guarantee and interest equalisation of 2 percent to EXIM Bank to offer concessional finance to any foreign government or foreign government owned or controlled entity, if any Indian entity, succeeds in getting contract for the execution of a project.
Prior to the introduction of CFS, Indian entities were not able to bid for large projects abroad since the cost of financing was very high for them and bidders from other countries such as China, Japan, Europe and US were able to provide credit at superior terms, i.e., lower interest rate and longer tenures which works to the advantage of bidders from those countries, the statement added.
Also, by having projects of strategic interest to India executed by Indian entities, the CFS enables India to generate substantial backward linkage induced jobs, demand for material and machinery in India and also a lot of goodwill for India.
Under this Scheme, the Ministry of External Affairs (MEA) selects the specific projects keeping in view strategic interest of India and sends the same to Department of Economic Affairs (DEA).
The strategic importance of a project to deserve financing under this scheme, is decided, on a case to case basis, by a Committee chaired by Secretary, DEA and with members from Department of Expenditure, Ministry of External Affairs, Department of Industrial Promotion and Policy (DIPP), Department of Commerce, Department of Financial Services and Ministry of Home Affairs. The Deputy National Security Adviser is also a member of this Committee. Once approved by the Committee, DEA issues a formal letter to EXIM Bank conveying approval for financing of the project under CFS. (ANI)