The fresh $4.5 billion line of credit (LoC) that New Delhi has announced will carry the same stringent conditions as the two previous credit lines that India had extended to Dhaka to help improve infrastructure.
Some 75 percent of the procurement of products, equipment or services to be made under any projects of the new LoC should be made from India, according to conditions tagged with the loan, officials at Economic Relations Division (ERD) said.
Indian Exim Bank, the financier of the LoC, has earlier sent a letter to the ERD outlining the conditions before Bangladesh and India on Saturday agreed on the third LoC during Prime Minister Sheikh Hasina’s visit to New Delhi.
Like the previous two LoCs, the third line of credit also bears one percent interest rate with a repayment period of 20 years, including a five-year grace period.
The commitment fees on unreleased funds will be 0.5 percent and if Dhaka fails to pay within the repayment period, it will have to pay 2 percent additional interests.
The Indian authorities have also made it mandatory for Bangladesh to complete all tendering process for third LoC projects within 48 months of the loan agreement, and complete all the procurement in 72 months.
India wanted to incorporate the conditions in the MoU for the credit line, but the plan was dropped later after local authorities made some observations regarding the conditions, ERD officials informed.
“It will create a scope for Bangladesh to further negotiate the conditions of the loan,” an ERD official said, wishing not to be named.
Analysts observed that meeting all the conditions for the LoC will be a tough job for Bangladesh.
“For instance, the idea of procuring project materials like rod, cement, brick and sand from India is totally absurd as these items are easily available in Bangladesh,” they said.
The tough loan conditions coupled with bureaucratic tangles in Indian part have delayed first and second LoC project executions for years, they said.
The first LoC of $1 billion was signed on 7 August 2010. Subsequently, $200 million of the credit was declared grants and another $62 million was added to the total amount.
However, only $353 million of first LoC has so far been released.
The second LoC of $2 billion was signed on 8 March 2015. But Bangladesh only managed to get approvals for 11 out of 13 projects planned under the second LoC. But funds has yet been released for these projects.
Economic analysts said the loan conditions should be relaxed to help quick implementation of the projects. They also suggested being cautious about the quality and prices of the products or equipment to be procured from India under the LoC projects.
Source: Daily Sun, Dhaka, Bangladesh