JBIC Inks Largest Green Financing Deal with India

India's state-owned Power Finance Corporation (PFC) signed an agreement with the Japan Bank for International Cooperation (JBIC) in January 2025. Notably, the long-term (20-year) loan becomes the JBIC's largest green financing agreement in India.

Executed on January 16, the ¥120 billion Japanese JPY ($770 million USD) loan will finance renewable energy projects.

JBIC will provide the initial funding of ¥72 billion ($462 million ) while commercial banks will fund the balance. The deal anticipates PFC supporting India's transition to renewable and non-fossil-fuel-based energy sources.

*Japan Bank for International Cooperation and Indian stakeholders celebrate agreement on JBID's largest green loan ever to India. (Courtesy JBID website)*

What Kind of Projects?

JBIC's 'Global action for Reconciling Economic growth and Environmental preservation' (GREEN Initiative) provides the institutional umbrella for the new loan project. Kazunori Ogawa, Senior Managing Director of the JBIC, acknowledged that the new credit line is four times bigger than previous ones in 2018 and 2022. According to news reports, Ogawa sees closer cooperation with India's PFC as contributing to the overall strengthening of bilateral ties.

This deal involves PFC, one of the larger Indian players in the energy field. Incorporated in 1986 as a Non-Banking Financial Corporation under India's Ministry of Power, it now dominates the energy market with about a 20% share.

A joint venture between Sumitomo Corporation and New Delhi-based AMPIN Energy Transition is also among the Japan-India green projects. It would sell renewable energy through power purchase agreements with commercial and industrial players.

Separately, India's Ministry of New and Renewable Energy (MNRE) announced a major Japan-India offtake agreement to export green ammonia to Tokyo. This agreement will help establish a robust supply chain from production in India to consumption in Japan. Key players in the project are Sembcorp Industries, Sojitz Corporation, Kyushu Electric Power Co, and Nippon Yusen Kaisha (NYK) Line.

These projects are expected to pave the way for future collaborations in the green energy sector.

'India and Japan Vision 2025'

Incidentally, this year marks the zenith of the "Special Strategic and Global Partnership" outlined in the "India and Japan Vision 2025" outlined in December 2015. The past decade displayed the two countries' substantial convergence on political, economic, and security concerns. However, over the same time, the strategic realities have become far more complex.

As the centrality of the Indo-Pacific region has risen, challenges to regional security and stability have increased. Together, they have elevated the bilateral relationship.

A central pillar of India-Japan cooperation is the synergy between India's Act East Policy and Japan's Expanded Partnership for Quality Infrastructure for better regional integration and improved connectivity. This remains significant, especially from India's standpoint.

Delhi recognizes the dire need to build up the infrastructure in its Northeastern states. They are the bridgehead of India's connectivity to the East under Delhi's "broader Asia" concept that transcends geographical boundaries and oceans.

*India's transition to green energy is underway (Courtesy Invest India.gov)*

India in Japan's ODA Program

Appropriate implementation of Official Development Assistance (ODA) loan projects cannot be overemphasized. India has already received ¥3.5 trillion ($22.5 billion ) of public and private financing under the "Japan-India Investment Promotion Partnership." Japan's contributions, especially to infrastructure development and modernization in India via ODA have been key.

ODA from Japan to India has gradually increased since the late 1980s and rapidly increased since the late 2000s.

Incidentally, former Prime Minister Shinzo Abe's grandfather, Nobusuke Kishi became the first-ever Japanese Prime Minister to visit New Delhi in 1957. He launched Japan's first post-war ODA to India on that trip. The journey since that time has been a long, winding one.

India has been Japan's largest spending destination over the past two decades (2002–2021) when it comes to ODA. Disbursements under the program account for 10.6% of Japan's total. A sectoral breakdown of Japan's ODA to India shows that economic infrastructure accounts for approximately 70% of the total loan assistance.

Roads and Connectivity

Among other Indian states, the ODA loan assistance for the Northeast Road Network Connectivity Improvement Project (Phases 1, 2, and 3) is noteworthy. The ODA projects focus on enhancing road connectivity in Northeastern India. They identify technologies, infrastructure, and strategies to facilitate development, making them a critical benchmark testing India's relationship with Japan.

In this reference, Japan has agreed in principle to support a few critical Greenfield highway projects across Northeast India. The Japan International Cooperation Agency known as JICA, coordinates ODA for the Government of Japan. It has been involved in earmarking:

400 km of highway in Mizoram between Aizawl and Tuipang
150 km of highway in Meghalaya
two projects in Manipur, and
one each in Tripura, Nagaland, and Assam

Conspicuously no major project with Japanese assistance has been announced for the Indian Northeastern state of Arunachal Pradesh. Nevertheless, Japanese ODA has no doubt helped India bridge its infrastructure deficit to a large extent. In the long-term, Tokyo's role in developing infrastructure in India's Northeast, including in Arunachal Pradesh, will be the defining "confluence" of India's Act East initiative with Japan's Indo-Pacific strategy.

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Author: Dr Monika Chansoria

Follow Dr Chansoria's column "All Politics is Global" on JAPAN Forward, and X (formerly Twitter). The views expressed here are those of the author and do not reflect the views of any organization with which she is affiliated.