IFC to finance dam project in Maharashtra

Will provide finance for the Neera-Deoghar dam project in Pune district.

The Maharashtra government, which is finding difficult to get investors for irrigation projects in the state, has now decided to rope in the International Finance Corporation (IFC) to attract investors.

The private arm of the World Bank has agreed to provide finance for the Neera-Deoghar dam project, located in Pune district, and has also shown its willingness to prepare the bid document for the project, said Sanjay Ubale, secretary (special projects), Maharashtra government.

The government needs around Rs 40,000 crore (around $ 10 billion) to complete the ongoing irrigation projects and plans to raise at least around Rs 10,000 crore (around $2.5 billion ) through private investments in the projects over the next five years.

As a pilot project, the government would hand over the Neera-Deoghar dam project, with a storage capacity of 10 thousand million cubic feet (TMC), to the private sector. The government has already spent around Rs 700 crore on building storage capacity, but needs another Rs 700 crore for developing the distribution arm.

Though private investors like Reliance Industries, ITC, Godrej, and IL&FS had initially shown interest in the project, they have backed off as they found the project economically unviable.

The state government is offering the investors the right to collect user charges from farmers and other users of water, carry out contract farming in the command area, develop resort and other tourism-related activities in the dam area and also the right to develop captive hydel projects.

However, the investors will not have the liberty to decide the water user charge, as it would be decided by the regulator. Besides, talks with the state government over the viability gap funding and the government's refusal to accept their demand for large tracts of land in the command area of the dam are yielding no results.

The IFC offers loans at cheaper interest rates for infrastructure projects to private investors.