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Saturday, 31 December 2011 00:00
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Japanese stake in DMICDC will give it a fillip

 

The government’s plans to develop 24 industrial ‘smart’ cities over 5,500 sq km just got a fillip with Japan agreeing to give it $4.5 billion in return for a 26% stake in the project company Delhi Mumbai Industrial Corridor Development Corporation (DMICDC). Apart from the fact that few others have the ability to give out low-cost loans for long periods, Japan has a lot to contribute in terms of building ‘smart’ cities that keep the carbon footprint to a minimum, recycle water and waste, and have real-time governance solutions. Around 40% of global energy use is on account of transportation, so town planning, which reduces commuting through mixed land use, is critical—this requires using technology to make industry more resource neutral. This is especially important since one of DMICDC’s goals is to raise industrial output in DMIC states 1.6 times—a task facilitated by the fact that the cities are to be built along the DMIC which, with its fast-speed freight trains, gives the units a locational advantage.

That DMICDC should get a fillip of this sort is especially welcome, given that the project has been going nowhere for a while on account of faulty structuring where infrastructure firms IL&FS and IDFC owned 51% of it. This created an obvious conflict of interest since it would mean IL&FS would be structuring projects to bid them out on one end and one of its affiliates could be bidding for the project at the other end. More important, under the earlier structure, the government would be guaranteeing the Japanese loan, and taking on the currency risk, with no control over the project. A very big hurdle, however, remains in the form of land acquisition—in order to make this easier, the Land Acquisition Bill needs to be relooked. DMICDC will also have to work harder to ensure the Japanese presence in the project firm doesn’t mean an unfair advantage for Japanese construction and other firms.

 

 

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