RELATIONS WITH THE EU
The European Union and India - Development Cooperation
European Investment Bank
The European Investment Bank is the lending arm of the European Union. It is the biggest multilateral financial institution in the world and one of the largest providers of climate finance. The EIB helps the economy, creates jobs, promotes equality and improves lives both for EU citizens and for people in developing and emerging countries. In India, and in Asia more generally, EIB clients are primarily governments, policy banks, and state-owned companies, and in some cases commercial banks and businesses.
The EU's climate action bank
Climate change is one of the greatest global challenges of its time. Immediate and coordinated action is crucial to overcome its effects. The European Investment Bank, as the EU's climate action bank, has made climate action one of its top priorities and today is one of the largest multilateral providers of climate finance worldwide.
Ahead of the 2019 United Nations climate change conference in Madrid, the EIB Board of Directors approved a new set of targets for climate action and environmental sustainability, drastically increasing the EIB's ambition for the critical decade to 2030 which includes support for €1 trillion of investments in climate action and environmental sustainability in the critical decade from 2021 to 2030.
Today, the EIB commits more than 25% of its financing to climate change adaptation and mitigation and will gradually increase this share dedicated to climate action and environmental sustainability to reach 50% of operations in 2025 and beyond. The EIB has already provided USD 100 billion to climate-related projects in the five years from 2016 to 2020, as it helps turn the COP21 ambitious Paris agreement into reality.
The mission of the European Investment Bank is to foster sustainable growth within the EU and abroad. Sustainable Finance is at the heart of the EIB Group and shapes its activities and investment decisions. The EIB is firmly committed to sustainable development, which is anchored in its strategy and remains the foundation of the EIB's business model.
The EIB apprises and monitors all the investment projects it finances with regard to their sustainability credentials such as environmental, social, and governance aspects. The EIB makes a separate economic appraisal of all its investment projects to assess the costs and benefits to society as a whole. Only projects that fulfill both financial and a separate sustainability due diligence can be financed by the EIB. Projects financed by the EIB also have to comply with EU Environmental and Social Principles and Standards to incorporate environmental and social sustainability considerations into EIB investments.
The EIB in India
The EIB has supported long-term investment projects in India for over 25 years, bringing the experience and expertise of its in-house engineers and economists to help develop and appraise top quality projects. As of today, the EIB has approved €3.4 billion for India, of which €600 million still need to be signed. These operations have helped mobilise some €10.2 billion of investment in India's infrastructure.
The EIB's financing in India over the last six years has been 100% climate action, contributing both to the EIB's own ambitious climate action goals and to the climate strategies of the Indian government. Most recently, the Bank's Board approved in December 2019 financing of €400 million for the Bhopal metro.
The EIB opened its Regional Representation for South Asia in New Delhi on March 31st, 2017 and is hosted within the offices of the Delegation of the European Union. EIB Vice President Andrew McDowell recently visited Pune and Mumbai in January 2020, meeting the Chief Minister of Maharashtra, representatives of the State Government of Goa, Indian partner organisations, whilst hosting two seminars on urban public transport and sustainable finance for resilient urban infrastructure respectively. The EIB's President, Werner Hoyer last visited India in March 2018 for the inauguration of the International Solar Alliance, meeting PM Modi and Minister Piyush Goyal during his visit.
As an AAA-rated, policy-driven EU financial institution, the EIB offers attractive financial terms-competitive interest rates with loan durations aligned with the projects. Through its partnerships with the EU and other donors, the EIB can often provide grants to further improve the development impact of the projects the EIB support.
Through its financing, the EIB acts as a catalyst to attract the funding needed to meet the UN's Sustainable Goals for 2030. In India, and in Asia more generally, the EIB has chosen to focus its lending on climate action across all sectors. The EIB also works to include gender equality in its projects, ensuring that women, men, girls and boys can benefit from projects equally and equitably.
Ensuring urban mobility in India's big cities
India's rapid growing population and increased economic development are straining the country's transport systems and posing serious environmental challenges. For the past five years, the Bank's financing has changed the way millions of people move- and breathe- in some of India's most heavily populated cities.
- Lucknow Metro- a €450 million loan from the EIB is expected to increase the share of public transport services from 10% to 27% by 2030.
- Bangalore Metro- a €500 million EIB loan for the new metro line is expected to cut travel times for some journeys from two hours a day to just 15 minutes.
- Pune Metro- a €600 million loan will support the construction of two metro lines, which includes 31 kilometres of tracks and 30 stations.
- Bhopal Metro- a €400 million loan for the construction of two lines of metro totaling 31 km with 30 stations and purchase of a related fleet of metro cars.
Transport is the key to growth and competitiveness, as it provides the physical networks enabling the movement of people and goods. Better mobility provides access to jobs and social services such as hospitals and schools that contribute to the improvement of people's lives.
Backing India's renewable revolution
The promotion of sustainable, competitive and secure sources of energy is a key EU policy objective and an important sector of EIB financing worldwide. In support of the sustainable generation and transmission of energy, the EIB not only finances mature renewable energy technologies, such as onshore wind farms, hydropower, geothermal and solid biomass, but also strongly encourages the expansion of early-stage of evolving technologies, such as offshore wind, photovoltaic, concentrated solar power and second-generation biofuels.
Energy accounts for almost one-half of the EIB's portfolio in India, amounting to €1.6 billion. The Bank has supported investments in the generation and transmission of energy, most notably large-scale solar parks and wind farms across 7 states in India.
Investing in Indian priorities
The EIB gives priority to the following types of projects in India, and Asia more generally:
- Climate change mitigation and adaptation (e.g renewable energy, energy efficiency, urban transport, and other projects that reduce CO2 emissions).
- Development of social and economic infrastructure, including water and sanitation.
- Local private sector development, in particular support to SMEs.
Projects with a total investment above €25 million can be financed either directly to a project promoter or indirectly through a government or financial intermediary. Project promoters are required simply to provide the EIB with a detailed description of their capital investment together with the prospective financing arrangements. The total investment of a typical project in India is typically above €100 million.
For smaller projects, the EIB provides credit lines to selected partner financial institutions, which then on-lend the funds mainly to small and medium-sized enterprises(SMEs). The financial institutions assess each project, assume the credit risk and set the loan conditions for the final beneficiary according to criteria agreed with the EIB.
Resource Efficiency and Circular Economy
Aspirations of a rising population in an increasingly resource constraint world entail new growth models which allow pursuit of economic development in a sustainable manner. Resource efficiency and circular economy models are thus vital to decouple economic growth from resource use and its negative environmental externalities, especially to achieve the United Nations Sustainable Development Goals(SDG).
The EU's adoption of an ambitious Circular Economy Package in 2015 has helped it gain valuable experience in diverse areas including research and innovation, new models of funding and investment, and innovative collaboration platforms. Furthermore, the new European Green Deal aims to prioritise a new circular economy action plan to achieve its objectives.
The EU recognises that maximising benefits from the circular economy model will require its adoption at a global scale, which can only happen through effective collaboration and partnerships. India, with a projected per capita material requirement of 15 billion tonnes by 2030, three times the demand in 2010, faces environmental and social challenges arising from material availability. Hence, Resource Efficiency and Circular Economy models can help the country realise significant economic gains as well as social and environmental benefits. The EU's cooperation with India under the EU-India Resource Efficiency Initiative, launched in 2017, and being implemented together with the Ministry of Environment, Forest and Climate Change (MoEFCC) and the Niti Aayog aims to develop strategies for resource efficiency in transport, buildings, renewable energy, waste recovery, and other sectors through partnerships between businesses, NGOs and academia. The initiative aims to mainstream Resource Efficiency in the Indian economy and industry based on a life-cycle approach, and create an ecosystem for improving resource security and minimising environmental impacts. The main components of the EU-India cooperation for resource efficiency are Policy Support, Assessment Studies, Facilitating Partnerships between Indian and European businesses and other stakeholders and raising awareness amongst different stakeholders.
India's rapid growth and development has led to massive urbanisation with more than 10 million people moving to towns and cities every year. Severe pollution, including air pollution due to increased traffic, construction, and burning of waste are increasing emissions and impacting lives. The overall objective of the Air Quality Initiative is to assist India in air quality management and the EU has been working with 3 major Indian cities sharing the EU's know-how on air quality and partnering with India to address air pollution by developing a national strategy for ambient air pollution, especially in urban air settings. Follow-up actions are being designed at present.
India, home to 17.5% of the world's total population, has 2.45% of the earth's land area and receives abundant rainfall over a few weeks. Its growing reliance on groundwater(65% for irrigation and 85% for drinking water) is leading to falling water tables and increasing competition between users. With less than 40% of wastewater in towns connected to a municipal sewage system, water pollution is increasingly responsible for illness and declining environmental quality.
The EU is working closely with India to help improve its water resource management through the India-European Union Water Partnership (IEWP) Agreement of 2016. The agreement signed by the then EU Commissioner for Environment, Karmenu Vella and India's former Minister for Water Resources, River Development & Ganga Rejuvenation, Uma Bharti, laid emphasis on cooperation in areas like water law and governance; promotion of research, innovation and exchange of business solutions along with joint initiatives to rejuvenate the iconic Ganga river and India's other water bodies. Implementation of the India-EU Water Partnership is being done by bringing together a wide community of stakeholders from both sides through technical exchanges & workshops, annual water fora and creation of business and networking opportunities. The actions of the Partnership are a valuable contribution, not only to improve the water management but also to rethink, reassess and reorient water policy in India. Under the IEWP, a Joint Working Group comprising of representatives from the Ministry of Jal Shakti as well as Department of Water Resources, River Development and Ganga Rejuvenation, GIZ and the EU, are working together on nine priority areas related to water resources management as well as River Basin Management. The overall purpose of IEWP action is to facilitate cooperation between India and coalition of EU Member States on water-related issues along with fostering business opportunities for EU companies, who can contribute to efficiency and sustainability of water management in India.
IEWP works actively with other partners including think tanks, research organisations and other leading institutions in the domain.
Europe, which has achieved considerable success in improving its water quality through the Water Framework Directive(WFD), can help emulate improved water resource management. Adopted in the year 2000, the WFD entailed Member States preparing River Basin Management Plans with the objective of reaching good chemical and ecological standards defined by common standards.
Clean Energy and Climate Action
The European Green Deal puts clean energy and climate action at the top of the EU's domestic and external agenda. In these areas, the objectives of the EU and India strongly converge with both wanting to reduce their dependency on the import of fossil fuels, diversify their energy supply and increase their energy efficiency and share of renewable energy. Both are strongly committed to the implementation of the Paris Agreement.
Therefore, the EU and India are closely cooperating on ensuring affordable, clean and secure energy and on climate adaptation and mitigation. The framework for this cooperation is the India-EU Clean Energy and Climate Partnership (CECP), agreed at the EU-India Summit on 30 March 2016 and later confirmed in a joint statement at the EU-India Summit on 6 October 2017. The cooperation focuses on energy efficiency, renewable energy, smart grids, sustainable cooling, financing and the implementation of the Paris Agreement. It aims at bringing together policy makers, researchers, businesses and stakeholders from India, the EU and its Member States to exchange information, cooperate and learn from each other.
The Partnership is implemented through several projects, which are set out in more detail on a dedicated website.
It is estimated that by the year 2050, the number of people living in Indian cities will touch 843 million. Rural to urban migration is intense, affecting 10 million people per year in India. Challenges faced by cities such as overcrowding, pollution, social and technical constraints are substantial. The Indian government has taken up the challenge by launching the AMRUT( Atal Mission for Rejuvenation and Urban Transformation) program and more recently the 100 Smart Cities Mission, with the aim of improving services and developing public transport, sewerage, water supply, and public green spaces.
The EU has responded to India's urbanisation challenges through a number of initiatives:
- Joint Declaration on Partnership for Smart and Sustainable Urban Development (EU-India Summit in Oct 2017) contributing to India's flagship programs such as Swachh Bharat and the 100 Smart Cities Mission and AMRUT. This addresses challenges of governance and regulation, infrastructure funding, sustainable transport, resource efficiency and waste management converging in joint research, policy dialogue, exchange of best practices, setting up of platforms for business solutions and financing models for sustainable urban development by bringing together all relevant stakeholders.
- EU-Mumbai Partnership: Launched in 2013 with the aim to look into innovative solutions for issues faced by a megacity, it has led to a dialogue on all major sectors with establishing robust ties between the EU and Maharashtra, a state contributing to about 13% of India's GDP.
- World Cities Programme: Experts from Pune, Chandigarh, Mumbai and Navi Mumbai have teamed up with European cities Stuttgart, Lazio and Copenhagen to develop sustainable projects.
- Ecocities Project: With a €9 Million contribution from the EU out of an estimated total cost of €12 Million, it is being implemented by the IFC, part of the World Bank, in five cities including Bangalore, Bhubaneshwar, Chennai, Jamshedpur and Mumbai. It aims at developing increased use of renewable energy, promoting energy efficiency and SME clusters through public private partnerships and other funding mechanisms.
- International Urban Cooperation: Sustainable and Innovative Cities and Regions(https://iuc.eu/): Launched in April 2017, the program comprises of pairing 12 Indian and EU cities for sustainable urban development as well as supporting Global Covenant of Mayors Climate and Energy (https://www.globalcovenantofmayors.org) by setting up the Covenant of Mayors of India and supporting cities to join.
Urban Local Bodies: The EU is working to promote integrated urban management and improving basic municipal services such as water, sanitation and solid waste management in Raisen, Burhanpur in Madhya Pradesh; Kishangarh and Jaisalmer in Rajasthan; Solapur, Pune and Ichalkaranji in Maharashtra.