India shifts its stance on imposing tough conditions to extend the newly proposed $2bn line of credit to Bangladesh, officials said yesterday.
A line of credit (LoC) is a promise to provide loans at subsidised rates from agencies such as Exim Bank of India.
These are normally conditional on the recipient, using the loan amount to buy equipment and services from the Indian entities such as BHEL, RITES, small and medium enterprises.
Under the LoC, a minimum of 75% of goods and services needs to be of Indian origin and must be procured from India.
“Exim Bank of India relaxes some conditions for fresh LoC in response to our request,” said an official of Economic Relations Division (ERD).
Recently, the bank has made some changes to its conditions and sent those to us, he said.
An inter-ministerial meeting was held to discuss the amended conditions yesterday at the ERD.
“The outcomes of the meeting will be sent to India and a win-win negotiation will be on to find a solution that is acceptable to both parties,” said another official.
He said India has shifted its stance on earlier conditions and now it wants to attach project-based conditions.
The terms and conditions for the fresh LoC are almost similar to those of the first $800m Indian LoC, he said.
In reply to India’s conditions in July, Bangladesh had proposed that 60% goods and services would be procured from India and the rest 40% from Bangladesh, and 50% construction materials like brick, sand and cement will be procured from India and 50% from Bangladesh.
But in amended conditions, India did not mention brick, sand and cement, dampening the progress of the proposed 13 development projects under the fresh LoC.
Though conditions on 75% procurement of goods and services from Indian side were relaxed, some conditions on construction materials procurement might be difficult to comply with, according to some officials.
Under the amended relaxed conditions, India proposed to hire 75% instead of earlier 100% consultant appointments from India.
Both countries, however, agreed to form a joint consulting firm with representatives from both sides.
India offered fresh LoC at 1% interest and 0.5% commitment fee (on undisbursed amount). The loan will have to be repaid in 20 years with a five-year grace period.
In August 2010, Bangladesh signed first $1bn credit deal with India to support Bangladesh’s development works. Of which, $800m has so far been released.
The proposed 13 projects for fresh LoC are setting up of double railway tracks in Khulna-Darshana line, converting the Parbatipur-Kaunia metergauge (MG) line to a dualgauge 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.
