EXIM Bank to drop goods sourcing condition

Export-Import Bank of India has agreed to drop an important condition -- import of 75 per cent goods and services from India -- attached to its credit for the controversial Rampal power plant, officials said.
The condition would be deleted from the revised term sheet of the financial agreement on about US$ 1.6 billion loan to finance the 1,320-megawatt (MW) coal-based power plant being built near the Sundarbans.
Officials are hopeful about signing the loan agreement next month.
The managing director of Bangladesh-India Friendship Power Company Limited (BIFPCL) has apprised a recent high-powered government committee -- the standing committee on non-concessional loan -- meeting of the development, according to an official document obtained by the FE.
The BIFPCL is a joint venture with equal stake of Bangladesh Power Development Board (BPDB) and India's state-owned National Thermal Power Corporation (NTPC).
The MD informed the meeting that they had talks with the EXIM Bank about the amendment as the bank has agreed to drop the condition from the financial contract.
The committee at the meeting approved the loan proposal pending deletion of the condition relating 75 per cent to procurement of goods and services from India.
The meeting was told that the bank agreed to drop the condition as it was related more to the EPC (Engineering Procurement Construction) contract than the financial contract.
It was not, however, made clear whether the EPC contractor would have to import the 75 per cent goods and services for the power plant from India.
Some critics had raised question as to why the goods and services will have to be imported, particularly from India.   
The condition has sparked widespread criticism about the financing arrangement for the Moitree Super Thermal Power Plant Project, which is facing even more intense protests due to environmental concerns.
The BIFPCL earlier in July signed an agreement with Bharat Heavy Electricals Ltd (BHEL) of India to construct the main plant.
The loan bears an interest rate of six-month LIBOR plus 1.0 per cent to be repaid in 27 half-yearly instalments, starting after seven years of grace period, according to the approval given at the standing committee meeting.
The Rampal power plant, a fast track project of Bangladesh, is being set up with a debt-equity ration of 70:30. The government of Bangladesh has given its consent to provide sovereign guarantee against the 70 per cent debt subject to some conditions.
The EXIM Bank of India had submitted a financial proposal in line with a proposal by the EPC contractor Bharat Heavy Chemicals Limited, India (BHEL) in September last year.
The Power Division of Bangladesh had formed a committee to negotiate and make easier the conditions mentioned in the term sheet of the financial proposal. The commitment fee of the loan could be reduced to 0.45 per cent from 0.50 per cent while changing the calculation method of the commitment fee. The reduction in commitment fee would result in saving of $19.46 million for BIFPCL.
Of the total loan amount up to $1.6 billion under ECA (Export Credit Agency) financing, about $1.5 billion is for spending on construction of the main plant and the rest amount would be spent for other purposes.
According to the Power Division proposal submitted at the high-powered committee meeting, the loan will be paid back by the BIFPCL from the proceeds of electricity sales, following implementation of the project.
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