CDC, the U.K.’s development finance institution (DFI), is making a $25 million direct investment in Pristine Logistics, a growing Indian company that develops and operates vital infrastructure to transport and handle railway freight in rural and under-served parts of the country. The company focuses largely on the low income states of India, such as Uttar Pradesh and Bihar, where essential infrastructure is important to economic growth and development.
Pristine Logistics is developing, constructing and operating greenfield rail freight terminals across northern, central and eastern India, encompassing some of the least developed regions of the country. The terminals provide handling, warehousing and transport services for businesses using the Indian Railways network for freight transport.
Located deep inland, far away from the key trading hubs on the coast, India’s low income states are in urgent need of modern and efficient infrastructure. However, many investors are cautious about infrastructure and private capital is scare in this sector. As a DFI, CDC can bridge this gap by provide long-term, patient capital to help create the infrastructure fundamental to trade and growth.
Pristine Logistics also plans to develop a food park in Bihar, creating a further 1,800 jobs directly. Bihar is one of India’s largest fruit, vegetable and dairy producing states, but the lack of fast, reliable and temperature-controlled transportation means that many Bihar farmers cannot bring their produce to market. The result is that substantial amounts of agricultural produce are left to rot, leading to panic selling each season. The food park will bring much-needed food processing, storage and modern transport services to local farming communities.
Although India has made significant economic and developmental progress in recent years, this has been heavily concentrated in a small number of fast-growing states. Deep contrasts remain, and the challenge for economic development in low income states remains significant. For example, the Reserve Bank of India reports that in 2012 the top two Indian states alone accounted for nearly 50 percent of foreign direct investment (FDI) flows into the country, while Orissa, Uttar Pradesh, Bihar and Madhya Pradesh – states where Pristine Logistics will have impact – together only attract 1 percent of FDI. Analysis by the recent McKinsey’s Insights India Report shows that eight of India’s “high performing” states account for around 45 percent of India’s GDP.
CDC will also support Pristine Logistics as the company develops its procedures around environmental and social policies. In this way, CDC can contribute to the sustainable development of the company and build management capability in this field.