AFD Group in India
France and India sealed a strategic partnership for better management of global public goods
On the occasion of President Sarkozy’s State visit to India in January 2008, India and France signed an intergovernmental agreement on Indo-French co-operation. This agreement, which enabled AFD to operate in India, came into force through the subsequent signature of a Memorandum of Understanding between AFD and the DEA (Ministry of Finance – Government of India) in September 2008.
The MoU outlines the main areas and the framework of AFD’s intervention in India, in line with the priorities of the Indian Government as determined under Five Year Plans. It was agreed that AFD would finance projects contributing to the sustainable management of global public goods, in particular:
- (i) energy efficiency, renewable energy, urban public transport;
- (ii) the preservation of biodiversity; and
- (iii) the limitation of the spread of emerging and contagious diseases.
In March 2009, AFD and the DEA agreed, on the occasion of their first annual consultation meeting, on extending AFD’s interventions to water and sanitation projects, provided that the latter generate significant energy savings.
The financial tools to be used in India by AFD (soft loans, sovereign vs non sovereign, subsidies, technical assistance) are also listed in the MoU. AFD’s assistance is ODA-compatible and is flexible, depending on the type of project or borrower. AFD’s financings can be extended to the Government of India (GoI), States governments, and to specific institutions, with or without guarantee GoI’s guarantee.
AFD has already identified many projects in India
Less than two years after its arrival, the AFD’s Board approved two operations in India:
- a € 70 million long term loan to IREDA (Indian Renewable Energy Development Agency), a request for a 200M€ non sovereign extension loan has been raised; and
- a € 50 million soft loan to SIDBI (Small Industries Development Bank of India), which could also be extended by 150M€ in to a new line including micro finance and venture capital.
AFD has approved in 2010 two new sovereign projects: one is a € 54 million loan dedicated to a forestry and biodiversity protection project in Assam, and the second a project of reorganization of water supply scheme in Jodhpur (71.1M€).
For the 2011/2012 period AFD has engaged discussions with BMRC (Bangalore Metro Rail Corporation) for financing Phase 1 (110M€). AFD is also exploring possible financings in the field of energy efficiency, including a credit line to REC (Rural Electrification Corporation) and to PFC (Power Finance Corporation). Other possible financings to NHB (National Housing Bank) in the building sector and HUDCO (Housing & Urban Development Corporation Ltd) are also in discussion. A collaboration with IDBI (Industrial Development Bank of India) for a 150-200M€ non-sovereign loan has also been considered, as well as new credit lines with the first clients of AFD (i.e IREDA and SIDBI).
AFD also forged partnerships with Indian research institutes
AFD forged solid partnerships, in particular with The Energy and Resources Institute (TERI), and has been sponsoring the Delhi Sustainable Development Summit (DSDS) for over 3 years. AFD also coedited a flagship publication (`A Planet for Life’) in association with TERI and IDDRI. AFD is also strengthening its partnership with the Bureau of Energy Efficiency (Ministry of Power), by having a full time French Technical Assistant. Finally, AFD also financed studies in the field of energy, and carried out by the National Council for Applied Economic Research (NCAER), Trinity Partnership, and the International Institute for Energy Conservation (IIEC).
AFD supports NGOs in India
AFD has supported several NGOs working in India: Entrepreneurs du Monde and Inter-Aide benefited from subsidies amounting to € 83,000 and € 158,000 respectively. In addition, AFD granted a € 500,000 loan to support Good Planet’s initiative to install bio-digesters in numerous Indian villages in Karnataka (implementation carried out by SKG Sangha).
Proparco, AFD’s subsidiary dedicated to the development of private sector, is proactive in India
Initially similar to AFD’s mandate, Proparco’s activities in India were extended by its board in March
2009 and henceforth cover a wider spectrum of sectors, including:
- (i) clean energy;
- (ii) energy efficiency;
- (iii) microfinance;
- (iv) food processing industries; and
- (v) health & education.
Not only can Proparco operate directly (though equity, quasi-equity, loans to companies or through project finance) but also indirectly through investments funds and financial intermediation.
In 2009, Proparco signed 4 financing agreements (Yes Bank, Petronet LG and SIFL), amounting to 132,2M€.
In 2010, Proparco signed 4 deals:
- BPCL (Bhoruka Power Company Limited): 8 M€ loan for cofinancing of a wind farm of 24MW with DGE and a local bank
- ICICI: 36,5M€ senior loan, dedicated to clean energy (including 40% under-participation AFD)
- Vicat Sagar Cement: 27,5M€ loan to finance the construction of a greenfield cement works in Karnataka. The deal was led by IFC
- LOK Capital: 10M$ equity if PE fund specialized in microfinance in India
A new project has been signed in April 2011 with JK Paper for 9M€ (convertible obligations), in collaboration with FMO and DEG, to promote energy efficiency programs.