European Investment Bank (EIB), the lending arm of the European Union, is one of the world’s largest multi-lateral financiers. In Asia, its focus is on climate change mitigation and adaptation, development of social and economic infrastructure and local private sector development. In the past several decades, EIB has financed projects such as the Bangalore Metro line R6, Lucknow Metro project, Bhopal Metro and Pune Metro. It has also handed out framework loans to finance renewable energy projects, energy sustainability, solar and wind energy projects. The Hindu spoke to Dr. Donal Cannon, the bank’s regional head of representation (South Asia), on the sidelines of a conference held in Mumbai on ‘Climate crisis: action for tropical coastal cities.’ Edited excerpts:
Do you see any parallels between the climate crisis in European countries and the crisis in India?
Absolutely. Climate change is a global challenge. The risks are broadly the same — increased storm damage, flooding and more. Some risks are beginning to become more apparent, like water woes. We saw Chennai reach day zero in terms of its water supply last year, which bizarrely wasn’t a worldwide story. What struck me was Cape Town had a similar story going which the world press was watching… [but it] was not watching Chennai. India is a little more reserved when it comes to projecting such issues and the risks they face, it’s quieter and part of it is because India culturally is a lot more resilient. Mumbai has suffered the 2005 floods, the terrorist attack and the floods three years ago. What is remarkable for me as a European coming to India is how quickly people recover. I saw people going back to normal next day after staying back in their offices for two to three nights (2017 Mumbai floods). This is a testament to Mumbaikars and to Indian culture. Perhaps that resilience works against us in addressing these climate issues. You have seen it all before. It’s remarkable what this city has seen and dealt with already. [Climate emergencies are] a very present and real danger but one [Mumbaikars] have already dealt with, so they feel quite capable. There is a potential threat to coastal cities in India and they are not ready to think in terms of scale of response that’s needed. They need to scale up their thinking and level of preparedness. [But] I met the Municipal Commissioner recently and it is remarkable how much thought they are putting. It was interesting to hear him talk about the challenges he faced — not financial but governance issues — making sure these projects that are good ideas stay in courts. That’s the difference between Indian and European cities — court processes, which can be very healthy but can often get in the way of development. So I have a great deal of sympathy for his difficulties.
In Mumbai, we constantly find ourselves caught in the development versus environment debate. Do European countries also suffer from this kind of dilemma?
Oh, very much. Countries do face exactly the same issues, any democracy will. It’s a sign of a vigorous democracy. But I think the trade off from EIB’s point of view is natural solutions to high technology solutions and restoration of city river systems, coastal city water management systems. For example, Surat water plaza, those things are good solutions balancing environment and the need for high density infrastructure. Density is to be strived for, that we all support. It is interesting to see the role of technology. London has water transport at the heart of their solutions, there is a thriving water taxi system. So for transport you don’t have to think of a huge road system. Now Mumbai is making important investment in coastal road and rich infrastructure for Navi Mumbai. Those are of course very important. From a financier’s point of view, transport solutions have a lot of value. Development can happen around these transport solutions: residential, commercial, mixed use. But it is transport that gives that development the value.
In Mumbai, they tried to carry out transit-oriented development, but it met with a lot of resistance since activists felt infrastructure will not be able to take the load…
It is a real challenge, the scale of urbanisation. And climate crisis will only increase the pressure on our urban cities. More and more people will flock to cities for not only employment but also safety and services.
What projects is the EIB involved in in India?
We signed a deal, a low interest loan for Pune Metro for €500 million. There are two advantages to multilateral investments — one is that it’s low cost because it’s not for profits, our cost of funding is extremely low so we pass that pricing advantage to the project. And second is that we lend for long tenures. Normally when banks lend, they tend to be short-term loans. We lend for the economic life of the project which can be 20-50 years. We offer loans for 15-20 years. Spreading out the repayments affects the financial and economic liability of the projects. This is a very significant thing. EIB goes through Ministry of Finance for Metro. For solar and wind projects, we have a direct relationship with the local banks in the States.
So EIB thinks Metro is a very sustainable transport solution. But India is still dependent on thermal energy for electricity generation. Of course damage is much less as compared to fossil fuels…
The ridership of each Metro is in tens of millions. Each rider is a car journey saved. Even where there is CNG, there is still a large amount of carbon dioxide emissions. EIB doesn’t finance coal, oil or gas. It is difficult for us to support fossil fuel projects. As more and more renewable energy comes into the grid, we need better uses for it. Electrification of not only passenger transport but also freight transportation is required. Coal is there, you have to live with it.
Electric vehicles (EVs) in India have not go the push they require. Do you feel the need for research in this arena?
I think India is further ahead than you think in terms of EVs. The government has come out with some very clear signals in terms of EV fleets. We get at least one strong pitch per week around EVs. People are really starting to scale their investment. And I think there aren’t many countries in the world that are as advanced in their thinking as India. I can think of one or two European countries, certainly Norway, those are the real pioneers. But India is somewhere between a pioneer and a fast forward. It is making huge strides. It’s not just the vehicles people are investing in. I see storage infrastructure proposals, charging infrastructure. What’s encouraging for me is the number of hybrid solutions — people who want to operate a fleet of vehicles with charging and storage infrastructure. People are thinking with multiple dimensions, putting investment where it’s needed. The other thing unique about India [is] it’s highly technically literate. That’s creating opportunities for new business models that are becoming very important in implementation of EVs. There are people who are buying EV fleets. But there will be a separate business class people who will use that fleet and be happy to pay on a per passenger or per km basis: freight operators airport buses, intercity buses. I don’t need to put up big scale investment. I’ll get a vehicle and only pay when I use it. They will attract customer and generate revenue. These new business models are what comes from the market.
So far we had EVs running within the city but now we have a private intercity electric bus service between Mumbai and Pune…
I think it’s a fantastic initiative. I haven’t seen it in operation myself. It’s this kind of business model, in the longer term for India, to decarbonise its development. More and more people will have access to high quality transport services at a reasonable cost and very low carbon footprint. The other thing about these business models is their contribution to circular economy. The separation of operations and capital investments. Fleet operators paying for vehicles only in per km basis, their interest is in giving service. Owners’ interest is in maintaining the fleet to highest possible standard. They will ensure it has a higher economic life. In many cities we see ageing bus fleets and consumers have no choice but to use them even though they are uncomfortable.