What will be the fate of the new LOC?

New Delhi has formally announced to provide $4.5 billion in assistance to Dhaka as a third line of credit (LOC) for implementing different projects in Bangladesh. Indian Prime Minister Narendra Modi made the announcement on Saturday at a press conference in New Delhi, where his Bangladesh counterpart Sheikh Hasina was present. Modi said: “The fruits of our cooperation must benefit the people of both countries. In this context I am happy to announce a new concessional line of credit of $4.5 billion for the implementation of projects in priority sectors of Bangladesh. “…This brings our resource allocation for Bangladesh to more than eight billion dollars over the past six years.” According to the proposal, the third LOC has a 20-year repayment term, including a grace period of five years and a 1% interest rate with 0.5% commitment fee. However, according to an analysis of Bangladesh Bank’s research department, the Indian LOCs have resulted in huge liabilities for the Bangladesh government with the loans’ nature being “supplier’s credit.” The analysis has also revealed that the viability of projects implemented under the Indian LOCs is being questioned. In an interview with Indian newspaper The Hindu, Mashiur Rahman, economic advisor to Prime Minister Sheikh Hasina, suggested undertaking more projects to expand transportation and trade and commerce in Bangladesh. Mashiur said the fund might be used in a single or multiple projects while India wanted Bangladesh to use it in the development of railway and road communication. Economic Relations Division (ERD) under the Finance Ministry has recently finalised 17 projects to be implemented with the third LOC. And, some Tk357.25 crore has been allocated for the projects accordingly, while the rest of the projects are yet to be finalised. Bangladesh Economic Zones Authority has sought $500 million for the construction of Mirsarai Economic Zone in Chittagong’s Mirsarai upazila. The first LOC of one billion dollars between the two countries was signed on August 7, 2010. Of the amount, $200 million was converted into a grant for the Padma Bridge project. The second tranche of two billion dollars was signed on March 8, 2015.Projects under third LOCThe two sides have already agreed to construct a seventh Agartala-Akhaura railway line for Bangladesh to transport goods to northeast Indian states. ERD sources said India would also invest $940 million in Bangladesh’s Rooppur Nuclear Power Plant project. Projects to be financed with the third LOC include construction of a 400KV power transmission line between Bogra and Jhharkhand at $177 million, restoration of the Buriganga river at $196.1 million, upgrading the Benapole-Jessor-Narhail road to a four-lane one at $100 million, establishing four economic zones at $450 million, upgrading the Ramgarh-Baraiar Haat road at $50 million, building railway and road connectivity for Ishwardi of Pabna, upgrading the Comilla-Brahmanbarhia-Saril road at $75 million, and developing the Ashuganj-Jokiganj road at $38 million .