The Hindu : Front Page : State keen on taking World Bank loan

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Saturday, Nov 05, 2005

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State keen on taking World Bank loan

Nagesh Prabhu

BANGALORE: The State Government now seems keen on taking a U.S. $1.1 billion World Bank loan.

Finance Minister P.G.R. Sindhia told The Hindu that the Government has decided to continue negotiations with World Bank officials in New Delhi to obtain three tranches of the loan. The Government is keen on taking the loan since the repayment period is 35 years and the rate of interest is very low.

Mr. Sindhia said half of the $1.1 billion loan would be from the International Development Association (IDA), a soft-loan arm of the bank, at 0.75 per cent interest and the remainder from the International Bank for Reconstruction and Development (IBRD) at 4.5 per cent.

A team of bank officials visited Bangalore on June 20 and 21 and held negotiations with the former Finance Minister Siddaramaiah, who was against borrowing from the bank on account of the buoyancy in tax collection in the current fiscal year. But the team expressed its unhappiness over the slow progress of power sector reforms, particularly metering and collection of tariff.

The World Bank agreed to give the loan under the Karnataka Economic Restructuring Programme for a five-year period in 2001 when S.M. Krishna was the Chief Minister. It released $150 million in August 2001 and $100 million in March 2002.

The bank has been releasing funds based on the progress achieved on the previous loan.

The third tranche of $250 million was originally scheduled to be released in 2003 but was withheld by the previous Vajpayee Government and negotiations were called off at the last moment.

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