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Japanese ODA for DFC project’s western corridor

The Union Cabinet has approved the proposal for availing Japanese Overseas Development Assistance (ODA) for implementation of the Western Corridor of the Dedicated Freight Corridor (DFC) project. The first phase of the assistance is estimated at Rs.17,700 crore for the Rewari-Vadodara Section and to start with an engineering services loan of approximately Rs.130 crore.
The ODA is under the Special Terms of Economic Partnership (STEP) Scheme of the Government of Japan. It is a soft loan with very low interest of 0.2% per annum (0.01% p.a. for consulting services), long repayment period of 30/40 years and a moratorium of 10 years. Approval has also been given for the terms and conditions of the tied loan which are briefly enumerated below:

Terms and Conditions of the STEP Loan:
(i) Prime Contractors must be Japanese firms. Joint Ventures (JV) with firms incorporated and re registered in recipient countries are also allowed to be a Prime Contractor, provided a Japanese firm is a lead partner. Sub-contractors may be from any country.
(ii) Not less than 30% of the total amount of contracts (excluding consulting services) financed by the STEP loan must be accounted for by goods and services from Japan. Here, procurement of goods from firms which are joint ventures in a recipient country and in certain developing countries can also be regarded as goods from Japan, subject to certain conditions.
(iii) In the case of consulting services, the prime Contractor i.e. the Consultants will be either Japanese or a joint venture with Indian partners where the total share of work of Japanese partners in the Joint venture is more than 50% of the contract amount.
The States of Gujarat, Maharashtra & Rajasthan are covered by the Western DFC Project.

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