Asian Development Bank on Tuesday approved $631 million for developing the 800-km industrial corridor between Visakhapatnam and Chennai, a part of the East Coast Economic Corridor.

The loan has been sanctioned for a period of 25 years at an interest rate of Libor (London interbank offered rate) plus 0.5%. ADB expects to start disbursement of the loans in the January-March quarter of 2017.

The 2,500 km long corridor will ultimately extend from Kolkata to Tuticorin in Tamil Nadu.

ADB’s loans and grants include a $500 million two-tranche facility to build key infrastructure and a $125 million two-tranche loan to help in industrial policies and business promotion in the four main centers of Andhra Pradesh along the corridor—Visakhapatnam, Kakinada, Amaravati, and Yerpedu-Srikalahasti.

There will also be a $5 million grant from the multi-donor Urban Climate Change Resilience Trust Fund that is managed by ADB to build climate change resilient infrastructure and a $1 million technical assistance to help the Andhra Pradesh local government manage the corridor. The Indian government will provide extra funding of $215 million to the $846 million project.

Manoj Sharma, principal urban development specialist in ADB’s South Asia Department, said by combining state-of-the-art industrial clusters, efficient transport and reliable water and power supplies with a skilled workforce and good business policies, ADB expects the Visakhapatnam-Chennai industrial corridor to become a favoured investment destination. “We estimate that by 2025, annual industrial output along the corridor will increase fourfold to $64 billion from about $16 billion in 2015 if investment opportunities are maximized over the coming 10 years."

Asked whether Andhra Pradesh can use part of the funds for developing its capital city at Amaravati, Sharma answered in the negative. “There is a separate request of AP for developing its capital city. But it is yet to be approved by ADB," he added.

Sharma said it decided to fund only part of the ECEC running through AP as it is administratively difficult to manage a project running through multiple states. “AP was chosen because of its dynamic and reform-oriented leadership," he added.

Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.

Share Via