Ministries request for softening terms on fresh Indian LoC

Many government ministries have sought relaxation of the conditions for US$2.0 billion fresh Indian line of credit (LoC) to implement their proposed projects, officials said Thursday.
The project executing ministries and other regulatory government agencies concerned at a meeting in Dhaka Thursday called upon the Economics Relations Division (ERD) for negotiating with New Delhi to simplify terms and conditions of the fresh loan.
The ERD convened the meeting Thursday at its office in Dhaka to take opinions of the ministries which will implement the proposed 13 development projects under the $2.0 billion LoC and other regulatory ministries.
ERD additional secretary Mohammad Asif-uz-Zaman presided over the meeting.
As per the lending terms and conditions, Bangladesh will have to procure 75 per cent goods and services from the Indian market.
India has offered $2.0 billion in loans for Bangladesh charging 1.0 per cent interest and 0.5 per cent commitment fee (on undisbursed amount).  The loan will have to be repaid in 20 years with a five-year grace period.
An education ministry official said if they have to comply with the condition of procuring 75 per cent goods and services from the Indian market, they would require to buy construction materials and hiring labour from the Indian market.
He said with the Indian conditions for the fresh LoC, it would be difficult to build their proposed polytechnic institute and teachers' training colleges.
The education ministry has proposed to include the 'Construction of 49 polytechnic and teacher-training institute' project under the Indian LoC.
A health ministry representative at the meeting Thursday also echoed the same opinion over the conditions for the $2.0 billion LoC.
Some other participants questioned as to how the agencies would procure construction materials like brick, sand, cement, and railway sleepers from India since many projects under the upcoming LoC will be on infrastructural development.
They have recommended negotiation with the Indian lender for simplifying the conditions on the proposed loan, insiders said.
A Ministry of Finance (MoF) official said since all the terms and conditions for the pledged $2.0 billion LoC will be difficult to comply with some projects, especially for the infrastructure-development ones, Bangladesh will require to request the lender to make those easier.
An ERD official said they had asked the ministries and agencies concerned to give their opinions in writing which would help them negotiate with the Indian lender EXIM Bank. As per the Indian government's offer, the Indian EXIM Bank will provide the $2.0 billion LoC to Bangladesh.
During his Dhaka visit, Indian Prime Minister Narendra Modi pledged the loan for Bangladesh's infrastructure and socio-economic development.
The ERD official said the terms and conditions for the second $2.0 billion LoC held out by Delhi are almost similar to those of the first $800 million Indian LoC.
Yet, New Delhi has tagged a new condition that Dhaka has to report 'impact of the performance' of all projects under the proposed LoC to New Delhi every six months, he added.
The ERD official said they are expecting to sign the $2.0 billion loan deal with India within next two to three months after a successful negotiation soon,
The proposed 13 projects for fresh LoC are setting up of double railway tracks in Khulna- Darshana line, converting the Parbatipur-Kaunia metre-gauge (MG) line to a dual-gauge track, upgrading the Syedpur railway workshop, installation of Barapukuria-Bogra-Kaliakor 400-kilovolt power-transmission line, procurement of 500 trucks and 500 buses for BRTC, procurement of modern equipment to upgrade the Roads and Highways Department, setting up of four medical colleges and hospitals, national burn and plastic surgery institute, construction of 49 polytechnic and teacher-training institutes, upgrading of Ashuganj river container port, and improvement of Ashuganj river port-Akhaura road.
Two other projects under the ICT ministry are also included in the list.
Currently, the Bangladesh Railway has undertaken the highest 13 projects under the $800 million Indian LoC for upgrading its infrastructure and service facilities out of the total 15 projects.
New Delhi signed a $1.0 billion credit deal with Dhaka in August 2010 to support Bangladesh's development works, especially transport development between the two countries.
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