The finance ministry has approved over $1 billion in external commercial borrowings (ECBs) in the first few weeks of the current fiscal year, with the bulk of approvals being granted to telecom, power and petrochemical projects.
Cellular telecom companies AT&T-Birla and Sterling Cellular have received ECB clearances worth $250 million and $80 million respectively. Other major projects to have received ECB approval in recent weeks include the power projects of Reliance Patalganga ($230 million) and Natpha Jhakri Power Corporation; and Reliance Industries Jamnagar petrochemical project ($425 million).
Significantly, there is not much of a lag between receiving approval and raising the funds. For instance, about $5 billion has already been raised out of the approvals worth $7.5 billion doled out by the ministry in 1996-97, say top government officials.
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The rush to raise ECBs comes at a time when the domestic markets are flush with liquidity and domestic interest rates are on a downward trend. Government officials see this as a pointer towards fresh investments in infrastructure.
AT&T-Birla the cellular services licensee in Maharashtra and Gujarat has mandated Bank of America and Toronto Dominion Bank to raise the $250 million. The company plans to invest about $1.1 billion in the two states over the next 10 years. The Ruias-controlled Sterling Cellular holds one of the licences in Delhi and is the holding company of Aircell-Digilink, the licensee in Haryana, Uttar Pradesh (East) and Rajasthan.
The $230 million ECB of Reliance Patalganga is to part-finance its 410 mw power project. The power plant which received naphtha allocation from the petroleum ministry last week is being set up at a cost of $400 million. The expansion of the groups Jamnagar petrochemical facilities are expected to absorb $425 million.
A number of other telecom projects are expected to apply for ECBs soon. Most of the 17 cellular companies in the country have mandated or are in the process of shortlisting bankers for such borrowings. Andhra Pradesh licensee Tata Cellular has also mandated Bank of America and Toronto Dominion for its project. Some basic telecom projects are also expected to source ECBs this year. The finance ministry has fixed an ECB cap of $8 billion in the current financial year. About $ 2.5 billion has been earmarked for power and telecom sectors, and about $1 billion for term lending institutions.