MIGA Supports DFCCIL’s Access to Global Financial Markets
Washington, March 4, 2024 – The Multilateral Investment Guarantee Agency of the World Bank (MIGA) has issued a guarantee of up to $132 million to MUFG Bank of Japan to support financing of investments by the Dedicated Freight Corridor Corporation of India Limited (DFCCIL) for up to eight years. The MIGA-covered loan will be used to assist the ongoing design and construction of one of India’s largest rail infrastructure projects -- the 1,840-kilometer-long electric high-speed freight-only railway system from Ludhiana in the northern state of Punjab to Kolkata in West Bengal.
This is the first major guarantee operation by MIGA in India. The transaction will be completed through the International Financial Services Centre of GIFT City. The MIGA-covered loan will enable DFCCIL to diversify its funding sources, leveraging private sector financing. The proceeds of the MIGA covered loan will be used to complete the construction of the Eastern Dedicated Freight Corridor — a 794-kilometer-long railway — and the “last mile” of connectivity between the freight corridor and logistics terminals.
Freight transport is critical to India’s growing economy. India’s railway is the fourth-largest network in the world, which provides the most cost-effective mode of freight and public transport, carrying 3.5 billion passengers and 1.4 billion tons of freight in FY22. The project is part of India’s National Rail Plan Vision 2030, which seeks to develop dedicated freight corridors to increase and sustain the modal share of railways to 45 percent of freight traffic. The project will lead to a net reduction of greenhouse gas emissions of 1.02 million tons.
“This important rail infrastructure project is supporting India achieve a transformative modal shift from road to rail, creating new economic opportunities while contributing to India’s on-going climate transition,” said Junaid Ahmad, Vice President, Operations of MIGA “It is not only the first time that DFCCIL will access private commercial financing, and that too from global markets, it is a historic first for MIGA in India.”
“This is a great showcase of how MIGA can utilize its guarantees to scale up private investments in a strategic and important sector for the economy.” said NK Singh, co-chair of the G20 Expert Group on MDBs. “MIGA should expand its partnerships and invest in product innovation to achieve even greater scale and relevance for financing infrastructure across India’s federal system.”
The freight corridor's state-of-the art technology, including high-quality wagons, higher speed, and longer trains will carry larger freight loads, powered by electricity through an overhead wiring cable. Moreover, traffic management and supervision will be centralized to monitor real-time information of trains, power systems, and signalling. Passengers will also benefit from reduced congestion where freight trains currently operate on the same lines.
"We are delighted to partner with DFCCIL and MIGA in this pioneering collaboration, which should serve as a template for alternative financing solutions to drive India's accelerated infrastructure development," said Shashank Joshi, Deputy CEO for MUFG India.
The project will enhance domestic supply chains and regional connectivity by providing better quality and reliability of freight services across the geographical regions connected by the corridor. It will also encourage the development of new businesses and industries along the corridor.
“The MIGA-backed loan in India, facilitated through MUFG Bank, marks a significant milestone for DFCCIL's venture into commercial financing. This initiative opens new vistas of financing, fostering India's infrastructure growth and aligning with its ambitions of attaining higher-income status by 2047,” said Hira Ballabh, Director (Finance) of DFCCIL.
About MIGA
MIGA was created in 1988 as a member of the World Bank to promote foreign direct investment in emerging economies by helping to mitigate the risks of restrictions on currency conversion and transfer, breach of contract by governments, expropriation, and war and civil disturbance; and offering credit enhancement to private investors and lenders. Since its creation, MIGA has issued over $76 billion in guarantees across 123 developing countries, supporting more than 1,000 projects. Over the past decade, MIGA’s guarantees have generated more than 156,000 jobs in developing countries. In India. MIGA issued its first guarantee in 1997 for a $9.7 million telecom project.
About MUFG
MUFG Bank is Japan’s largest bank and one of the world’s largest, headquartered in Japan. MUFG offers myriad products and services including loan syndication, structured finance, working capital solution and trade finance. The company was established in 1919 and continues to expand its global footprint to over 105 branches outside of Japan and employs c. 33,000 staffs.
About DFCCIL
DFCCIL is a Special Purpose Vehicle set up under the administrative control of the Ministry of Railways of India to undertake planning and development, mobilization of financial resources and construction, maintenance, and operation of the Dedicated Freight Corridors. DFCCIL was incorporated in October 2006 under Indian Companies Act 1956.
Contact:
In Washington: Elizabeth Howton, (202) 458-5922, ehowton@worldbankgroup.org
For more information, please visit: https://www.miga.org
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