Extension of Indian Development and Economic Assistance (IDEA) Scheme

The CCEA has approved the operating and extending Indian Development and Economic Assistance (IDEA) Scheme during the period 2010-11 to 2014-15 for both African and non-African countries. Under the IDEA scheme, Government supported Export and Import Bank of India (Exim Bank) Lines of Credit (LoCs) are made available to developing countries for support of developmental and other projects as recommended by Ministry of External Affairs (MEA).

The details of the Scheme will be as under:

i.       Concessional LoCs will be provided through Exim Bank or any other suitable lending agency to the developing countries for support of such projects as recommended by MEA.

ii.      Resources for LoCs will be raised directly by the lending  agency from the international debt markets,

iii.      Concessional LoCs will be backed by sovereign guarantee to be given by the recipient/borrowing government, which may in turn be counter guaranteed by Government of India (Gol).

 iv.   Interest Equalization Support (IES) will be provided from budgetary resources to Exim Bank for enabling them to lend to developing countries on concessional terms.

v.      The Scheme will continue to be in operation for a period of 5 years for the period 2010-11 to 2014-15.   Further extension, with or without modifications in the Scheme may be considered at the end of the five year period when the Scheme will be reviewed. If there is no extension, there will be a winding up period of two years thereafter.

vi.  Concessional LoCs under the Scheme may be used for supplementing assistance packages from other donors. Gol may provide funds for project preparation and appraisal. This may include consultancy charges to be paid to professionals/organizations.

vii.     To guide implementation of the IDEA Scheme, detailed guidelines have been framed in consultation with MEA, Department of Financial Services (DFS) and Exim Bank.

Expenditure involved

i. Credit lines would be extended by EXIM Bank through borrowings by the bank from international debt markets. GoI would extend guarantee for payment of interest and repayment of principal only which would be a contingent liability. Financial implications for GoI would actually arise only in the event of default.

ii. The expenditure to be incurred by GoI is on account of Interest subsidy which comes to Rs. 1880 crores for the period 2010-11 to 2014-15. This includes the Interest subsidy on existing LoCs and new LoCs to both African and Non-African Countries. This would be provided from Central Government Budget (DEA Grant) and expenditure on the same is reflected for 5 years but would continue over the tenure of the loan which ranges from 8 years to 20 years.

The IDEA Scheme will be implemented over a 5 year period from 2010-11 to 2014-15. The total amount of LoC's to be given over the 5 year period i.e. 2010-11 to 2014-15 comes to US $ 8500 Million. Out of this, an amount of US $ 4800 Million (i.e. US $ 2000 Million and US $ 2800 Million) is as mandated by Cabinet decision taken by MEA in 2008 during the India-Africa Forum Summit meeting and announcement of Prime Minister at the India-Africa Forum Summit held at New Delhi on April 8-9, 2008. Thus the new proposal is for according net additional LoC's of US $ 3700 Million (US $ 8500 Million minus US $ 4800 Million) over the 5 year period i.e. 2010-11 to 2014-15.

The IDEA Scheme will promote India's political, economic and strategic interests besides building a positive image of India abroad.

Till December 31, 2010; a total of 137 LoCs have been sanctioned to 57 different countries involving a total Credit Amount of US $ 6,414.97 million.

Background

i.        The IDEA Scheme initially known as the India Development Initiative had its genesis in the announcement made by Finance Minister in the Union Budget for 2003-04, as an initiative for providing grants or project assistance to developing countries in the Africa, South Asia and other parts of the developing world and with a view to also leverage and promote our strategic economic interests abroad.

ii.    The Cabinet, in its meeting on April 3, 2008, had approved the proposals of MEA contained in the Cabinet Note dated March 25, 2008 titled: "Substantive commitments to be announced by the Prime Minister at the India-Africa Forum Summit, New Delhi, April 8 and 9, 2008" seeking the approval of the Cabinet, inter alia, for extending Lines of Credit to Africa valued at US$ 5.4 billion over 5 years beginning 2009-10, for projects to be agreed bilaterally and with the regional economic communities in various areas identified by the recipients and based on our own capabilities, past co-operation and identified needs.

iii.     It has been approved to continue operating and extending Indian Development and Economic Assistance (IDEA) Scheme during the period 2010-11 to 2014-15 for both African and non-African countries.