LMRC Loan: Sreedharan observe AFD’s FIDIC conditions lead to International Arbitrations, escalate Costs

Agence Francaise de Developpement not a right choice for funding a giant project like Lucknow Metro: Sreedharan


लखनऊ Lucknow (LKO): Lucknow Metro Rail Corporation’s (LMRC) much-publicised ‘positive talks’ with Agence Francaise de Developpement (AFD) for funding the city’s metro rail project may not hold much meaning as LMRC’s principal advisor E Sreedharan isn’t in favour of raising a loan through the French bank.

In a communication to LMRC on April 7, the ‘Metro Man’ categorically stated he would not suggest an AFD loan. “I am not very enthusiastic about AFD loan as it insists on FIDIC contract conditions which don’t suit the Indian situations and would lead to international arbitrations hiking the cost of the project,” the letter states.

FIDIC is the French acronym for International Federation of Consulting Engineers, an international standards organization for the construction industry.

The letter further states, “AFD also insists on clearances at every stage of the process which is very time-consuming and would delay the project tremendously.”

The currency exchange fluctuations are to be borne by the LMRC. If impact of these has to be taken into consideration, raising loan from other sources like Japan International Cooperation Agency would be very beneficial, Sreedharan emphasizes. AFD is known for funding small metro projects like those of Kochi and Jaipur.

Madhukar Jetley, Advisor, externally aided projects department said, “Lucknow’s metro is a large-scale project which would run up to 150km throughout the length and breadth of the city. The two corridors from Amausi Airport to Munshipulia Chouraha and from Vasantkunj to Charbagh Railway Station would together comprise 35 kms. The project can’t be compared to 15-20 km projects in other cities.” He added AFD had never been the sole funder of an extensive metro project in India and can’t be considered.

On the other hand, JICA carries expertise in extending full loan amount to mega metro projects of the country like Delhi, Chennai, Bombay and Bangalore etc. “Raising complete loan from a single agency is always convenient rather than borrowing money from multiple agencies. This makes the process complicated as the government has to follow conditions of different banks. Since Sreedharan is also recommending JICA, there are major chances of procuring loan from it”, he said.