$1bn loan from India to Bangladesh runs into 'complexities'

"Our implementing agencies are waiting for the lender's clarification about the complexities that have arisen on the procurement issue," the Financial Express newspaper reported, quoting a senior economic relations division official.

The official, who was not named in the report, said more than a month ago, Dhaka sent details of the 20 projects to be implemented using the loan, seeking New Delhi's clarification on the complexities "that have emerged" in  implementing the schemes.
However, no response has been received yet.

According to officials, the complexities have arisen in relation to the provisions of the loan agreement stipulating cent per cent procurement of goods, works and services from India under the USD 1 billion credit line.

"Eight months have already passed, but the project works have not started due to the procurement snags," a top planning ministry official said told the newspaper.

None of the concerned officials were available immediately for comment today, as Bangladesh observes a public holiday to celebrate the Buddhist festival "Buddha Poornima", marking the birth of Lord Buddha centuries ago.

Under the loan contract, Bangladesh will have to procure all goods, works and services from India for the projects, mostly in infrastructure sectors, though 15 per cent of the total contracts can be procured from Bangladesh if they can not be sourced from India.

Bangladesh penned the USD 1 billion credit agreement with New Delhi when Indian Finance Minister Pranab Mukherjee visited Dhaka in August last year to initially finance 14 infrastructure projects.

Under the deal, India would lend the amount -- the biggest it has offered to any foreign country -- at a 1.75 per cent interest rate, with a repayment period of 20 years, including a grace period of five years. Bangladesh officials said the loan amount was the highest they have received under a single deal.

The line of credit will be used by Bangladesh for developing its railway and communication infrastructure, power grid connectivity between Bangladesh and India and developing the state-run standard and testing institute.

The number of projects was later expanded to 20, including the upgrade of Bangladesh's rickety railway, road, river and port facilities.

"The implementing agencies have been seeking clarification from us by sending repeated letters, but we are not able to give them any positive feedback due to the absence of India's clarification on the 'dispute'," another ERD official told the newspaper.

A Roads and Highways Department official told the Financial Express that if they procured stone, cement, sand, bricks and all the works and services from India, the road construction cost would be almost double.

"The Indian government wants to supervise some projects through their consultants. But in our projects, there is no provision of appointing consultants. It has created another complexity," he said.

Under the USD 1 billion credit line, the government has undertaken 12 projects for railway development, five for transport sector improvement and three for port development and other works.

The deal was announced in a joint communiqué issued on January 12 last year during Prime Minister Sheikh Hasina's maiden New Delhi visit.