The Asian Development Bank (ADB) fears it will have to go slow on its proposed record sanctions of $1 billion for India during the current year, in the wake of the political uncertainty wracking the country.
The ADB believes that many of the proposed loans, which are for state-level projects, require tough economic decisions. These decisions could prove difficult to implement in the absence of the requisite political mandate, said top government sources.
The Bank believes that there is a certain risk associated with the loan conditionalities, especially in an election year, they said.
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ADB president Mitsuo Sato has already postponed an official visit, due in February. Sato, who was in the capital last year in connection with a seminar on reforms, was scheduled to return in February on an official invite from the government.
Among the firm loans those originally scheduled to go through in the current year at the state-level is a $300 million package for restructuring Gujarat Power. Progress on this loan is under cloud owing to the political flux in the state and the onset of general elections. The Election Commission had recently advised the state government to freeze all policy decisions relating to power.
The ADB is also discussing a private sector infrastructure facility loan for Gujarat, wherein $150 million is to be routed through the Gujarat Industrial Investment Corporation.
Another top priority loan under cloud is a $250 million package envisaged for a public resource management programme in Madhya Pradesh. The loan deals with public finance, taxation and public resource mobilisation and will be used to fund a blueprint to restructure the states public sector.
The Madhya Pradesh package will also, for the first time ever, focus on social sector investment, the creation of a social safety net and the evolving of a pricing of services system based on efficiency criterion.
ADB is also slated to hold preliminary discussions on a power sector loan, which will focus on adequate legislative changes, the setting up of a tariff regulatory authority and the laying down of minimum agricultural tariff.
The ADB has also initiated a feasibility study for a build-operate-transfer project on the national highway. The package, currently pegged at $150 million, could eventually go up to $200 million.