DhakaTribune
Tuesday December 19, 2017 02:10 AM

Govt to seal third LOC deal with India on Wednesday

  • Published at 11:38 AM October 02, 2017
  • Last updated at 12:56 AM October 03, 2017
Govt to seal third LOC deal with India on Wednesday
Photo:Bigstock

The new LOC will be used to finance at least 17 projects in Bangladesh, most of which are for infrastructural development

The government is going to sign the deal for the third Indian line of credit (LOC), worth $4.5 billion, in Dhaka on Wednesday.

Indian Finance Minister Arun Jaitley is arriving in Dhaka on Tuesday to ink the deal, one of the agreements signed by Prime Minister Sheikh Hasina and Indian Prime Minister Narendra Modi during Hasina’s visit to India back in April, said outgoing Senior Finance Secretary Hedayetullah Al Mamoon.

The LOC, to be signed in the Finance Division auditorium, will include the projects in Bangladesh that India has agreed to finance, he told the Dhaka Tribune on Monday.

“This is the first time that Indian Finance Minister Arun Jaitley is going to visit our Finance Division, so we are taking preparations to receive him appropriately,” Mamoon said, adding that the Economic Relations Division was in charge of all arrangement regarding Jaitley’s visit.

In a joint statement issued after Bangladesh and India signed the agreements in April, Indian Prime Minister Modi announced a new line of concessional credit of $4.5 billion to fund development projects in Bangladesh.

Modi also announced a $500 million credit for defence procurement by Bangladesh.

Bangladesh has two other LOCs open with India: the first one was signed in 2010, and the second one in 2016. These LOCs are collectively worth Tk3.06 billion, but till last year, Bangladesh government has been able to use only $576 million.

What does the new LOC offer?

The new Indian line of credit, worth a staggering $4.5 billion, will be used to fund 17 major projects in Bangladesh, most of which are for infrastructural development.

Of the total amount, $1 billion will be used to develop the power evacuation facilities – a system to expel power from the power plant to the national grid immediately after production – of Rooppur nuclear power plant. A significant amount of the loan will also be spent to upgrade 245km of road stretches in three major highways – Benapole-Jessore-Narail-Bhanga, Ramgarh-Baruerhat, and Moynamoti-Brahmanbaria-Sarail – to provide transit facilities to Indian trucks. In addition, the LOC will finance the upgrade of Chittagong and Mongla seaports under the transit and transshipment agreement between the two countries.

The government will use $500 million to develop and upgrade three economic zones (EZs) in Bangladesh for Indian investors: $100 million to develop special EZ in Mirsarai, Chittagong, $100 million to develop special EZ in Moheshkhali, Cox’s Bazar or Payra, Patuakhali, and $300 million for renovation of several other EZs.

Under the third LOC, at least 75% of the procurement for service-oriented projects and 65% for public works projects must be made from India.

Funds can be disbursed in 60 months at maximum after the expiration of the tenure set by commercial contracts under the new deal.

In the existing agreements, it is 48 months for service sector and 72 months for projects.

Waiving of 0.5% commitment charge in the third LOC will be considered by the Indian authority.

Under the new LOC, the Exim Bank of India will open a representative office in Dhaka for smooth implementation of the projects.

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