Chapter 15



15.1 Japan has been extending financial assistance for India’s development programme since 1958. Initially Japanese aid to India was channelised through the Government owned Export-Import Bank of Japan (J-EXIM). During 1975-76, aid was channelised through the Overseas Economic Cooperation Fund (OECF) of Japan. From 1976-77 onwards, both project and commodity aid are being channelised through the OECF. With effect from 1st October, 1999, J-EXIM and OECF have merged and the new agency Japan Bank for International Cooperation (JBIC) is the channel for both-ODA operations as well as the international economic operations functions of Government of Japan.

15.2 JBIC is a financial institution of the Government of Japan with a mandate to support the efforts of the developing countries towards establishing a more integrated and balance development.

15.3 Japan has emerged as the largest bilateral donor to India over the last ten years. Japanese assistance is mainly in terms of soft loans from the JBIC and a small part of the assistance comes in the form of grant and technical cooperation.

15.4 Salient features of OECF assistance are as given below:

  1. Soft loans, which are mostly project tied, carry an interest rate of 1.8%. For general environmental projects, the interest rate is 1.3% while for special environment projects it is 0.75%. The tenure of the loans is 30 years for the first two categories and 40 years for the special environment category.

  2. Japanese loan assistance is available for financing upto 85 per cent of the project cost either in foreign exchange or local cost.

  3. Since 1993-94 for the OECF loan package, all procurement is on general untied basis. No price preference to indigenous bidders under ICB is permitted.

  4. In the earlier years OECF assisted projects were concentrated in the infrastructure sectors like Power, Fertilizers, Telecommunication, Railways, Industry, Irrigation, Ports etc. In recent years, however, OECF(now JBIC) has shown willingness to finance projects in soft sectors like environment, health etc.

15.5 Consequent upon the nuclear test conducted by India in May 1998, Government of Japan imposed economic sanctions on India and froze Yen credit for the year 1998-99. After a number of high level discussions with the Government of Japan, only one project named Bakreswar Thermal Power Station Unit-3 Extension Project-II of West Bengal Power Development Corporation limited, Calcutta could be pledged and signed on 24-03-1999 for an amount of Yen 11,537 million. The sanctions however did not affect utilisation of existing credit lines.


15.6 Apart from the Project tied aid from OECF, Japan also gives grant aid of following kinds:

General grant
Cultural grant
Debt Relief grant
Increase in Food production grant and
Grants for fisheries

15.7 The total quantum of Japanese grant aid ranges between 3 to 4 billion Yen per year. The details of grant aided projects during 1998-99 are at Annexure II has been frozen since May' 98 following Japanese economic measures against India. However, grant aid for projects of humanitarian, emergency and grassroot (NGO) nature are not affected by the sanctions. Japanese debt relief grant is also not affected.

15.8 Grant Aid of Japan to India is extended through Japan International Co-operation Agency (JICA). JICA also co-ordinates programmes relating to development studies, feasibility studies, project type technical cooperation, expert dispatch programme and training of personnel from government and semi-government organizations of various sectors in Japan.