4 more projects to be dropped from Indian LoC
Four more proposed development projects are in the process of being dropped from the Indian Line of Credit (LoC) list due to complications over implementation and loan terms. India was supposed to lend $1.01 billion to these projects.
A proposal was sent to the Indian authorities to withdraw these projects from the LoC list due to the unwillingness of the implementing agencies, according to officials of the Economic Relations Division (ERD).
However, the $1 billion loan meant for these projects will be transferred to other ongoing projects running under Indian credit and are facing cost increases.
At present, 40 projects are running under Indian LoC and the number will come down to 36 if the four proposed projects are dropped.
Keep updated, follow The Business Standard's Google news channel
ERD officials said two projects were dropped from the LoC list in May this year with the consent of the Indian authorities. However, the consent to delist the proposed four projects is yet to be obtained from the Indian authorities even though the government proposed the exclusions last December.
According to ERD sources, the projects that are being withdrawn are a railway project for constructing a new carriage workshop in Saidpur at $70.28 million, the Bangabandhu Sheikh Mujib Shilpa Nagar project at $165 million, Bay Container Terminal project at $400 million, and Saidpur Airport project at $375 million.
Implementing agencies allege that the Indian loan scheme has various conditions, which include sourcing 75% of construction materials from India. Apart from this, approvals from the Indian authorities are delayed at various stages, starting from the preparation of tender documents to the appointment of contractors.
Besides, only Indian contractors can participate in Indian debt financing. It was observed that the Indian contractors often bid more than the estimates. Due to these complications, implementing agencies are not interested in implementing these projects.
The two projects that were excluded with the consent of the Indian authorities last May 2023 were Solar Based Stations for Strengthening the Teletalk Network project with a loan of $30 million and Supply Machinery for Solid Waste Management project with a loan of $24.83 million.
Six projects have been dropped from the LOC list in the last three years, including two projects dropped in May 2023.
Besides, packages of two more projects — construction of the Rooppur power transmission line and Khulna-Mongla railway — have also been excluded from the LoC list. India's loan offer for these projects and packages was $1.13 billion.
India is lending a total of $7.362 billion under the three LoC credit agreements. Of these, the first contract on the LoC for $862 million was signed on 7 August 2010. The second LoC loan agreement for $2 billion was signed on 9 March 2016 and the third LoC with India worth $4.5 billion was signed in March 2017.
Additional loan sought from India
Bangladesh is seeking an additional $804.26 million loan from India for the ongoing projects.
ERD officials said the cost of these projects has increased due to design changes, addition of new components and implementation delays.
The Barapukuria–Bogura-Kaliakair 400 KV line project requires an additional $385 million, the construction of 3rd and 4th dual gauge tracks in the Dhaka-Tongi section and the doubling of the dual gauge track in the Tongi-Joydebpur section project $178 million, Khulna-Mongla railway line project $80 million, Ashuganj River Port-Sarail-Akhaura four-lane project $71.06 million, $55 million for setting up IT, hi-tech parks in 12 districts and an additional $35.18 million in Ashuganj Container river port project.
These projects initially had an Indian loan proposal of $1.17 billion. Due to the cost hike, the debt is now increasing to $1.97 billion.
