The Finance Ministry has raised several objections on the draft credit agreement for the $12.65 billion loan from the Russian government for the Rooppur nuclear power plant construction.
In a letter to the Economic Relations Division, which is negotiating the deal, the ministry has asked to reduce the interest rate, amend advance payment clauses and include an unavoidable accident clause.
The ministry in its observations pointed out that a crucial element, a force majeure or unavoidable accident clause, is not included in the draft agreement. It also pointed out the lack of any court reference for dispute settlement and arbitration mechanism in the agreement.
“We have given our comments on Russia-Bangladesh Intergovernmental State Credit Agreement (ISCA). Although the negotiation is going on but the Economic Relation Division has not mentioned some of the time frames and figures,” a Finance Division official said.
ERD has mentioned that the state to state agreement will be complete by the second week of this month, the official said. Negotiations over the ISCA began in mid-March.
On December 24, Bangladesh and Russia signed a general contract for the construction and commissioning of the 2,400 megawatt Rooppur Nuclear Power Plant in Pabna, at a cost of $12.65 billion.
Sources at the Finance Division said that the Russian government had refused to pay for the education of a second batch of Bangladeshi students on nuclear science at universities in Russia despite this being a part of the agreement. A source said Finance Minister AMA Muhith had expressed his disappointment over this issue saying, “We have been nothing but deprived from this contract.”
Under the current terms the Rooppur nuclear power plant will be financed through the credit up to 90% and the remaining 10% will be provided by the government of Bangladesh as advance payment. The ministry wants this revised so that the 10% advance payment will also be financed.
Otherwise, if the cost is $12bn, the government will be required to pay $1.2bn which may put pressure on the forex reserve.
The ministry said the agreement should contain a clause under which if the company becomes unable to utilise the full amount of the credit, there will be provisions by which it can extend the time frame.
The ERD in its latest draft did not mention an interest rate, although in earlier drafts it was 6 month libor plus 1.75% with a 4% cap. The Finance Ministry wants this interest rate lower considering the country's stable sovereign rating and highly promising economic outlook.
Bangladesh has been maintaining a sovereign rating of BB/Ba3 for five consecutive years with stable outlook.
