Agencies find terms binding Indian LoC-III tougher

Want govt to renegotiate the deal

 FHM Humayan Kabir | Published: September 16, 2017 10:02:13 | Updated: October 25, 2017 05:20:49

Prime Minister Narendra Modi shakes hands with Bangladesh's Prime Minister Sheikh Hasina at Shahjalal International Airport in Dhaka June 6, 2015. Reuters

Agencies concerned find some terms and conditions attached to the use of India's fresh US$4.5 billion Line of Credit (LoC) for Bangladesh tougher and suggest the government should arduously negotiate the deal.


Officials said Friday reservations were expressed when agencies, who have taken 17 projects to execute under the LoC-III, sat with the Economic Relations Division (ERD) for an in-depth discussion on the draft loan deal, prepared and sent in by New Delhi.


The ERD Thursday convened the meeting as Bangladesh will sit with the lender for negotiations on the LoC-III.


Ministry of Finance (MoF) officials said since the lender has interpolated some new clauses and provisions into the draft loan deal on procurement for the project execution, Bangladesh government agencies concerned expressed their reservations.


According to the government officials, the draft credit deal says that the borrower (Bangladesh) should take prior approval for every piece of procurement for the projects under the LoC.


Officials feel it will be difficult for getting approval for every purchase as it will not only be waste of time but also project-executing agencies will be in trouble while procuring necessary goods or services or works exclusively from the Indian market.


"So, we have expressed our resentment over the conditions set in the draft loan deal, prepared by the Indian government for finalising through bilateral meeting," some officials involved with the proposed LoC-financed projects told the FE, wishing not to be quoted by name.


"The procurement terms and conditions should be finalised first before signing the deal. If those are not settled, there will be lots of problems during the project-execution period," one of the officials said.


According to the terms and conditions tagged with the current $2.0 billion worth of LoC-II, the project-executing agencies will have to procure minimum 75 per cent of goods/services/works from India while they could procure the remaining 25 from any other countries.


For the procurement necessary for civil works or constructions, the Bangladeshi agencies must procure minimum 65 per cent of goods/services/works from the creditor.


"The percentages of procurement were finalised in the LoC-II deal. But if those are not settled in the upcoming agreement, sometimes it could be difficult to convince the lender for the necessary procurement from outside India," said a couple of government officials concerned.


They said they had urged the ERD to go for tougher negotiation with New Delhi so that the terms and conditions set in the draft deal could be relaxed for smooth project execution.


The ERD has taken note of the reservations which will be sent to India shortly for taking their opinion and then the two sides will sit for negotiations on the unsettled issues, if needed, the officials said.


An ERD official said: "The implementing agencies for the proposed projects under the LoC-III gathered at the ERD on Thursday. We have discussed details on the draft loan agreement sent by New Delhi recently. We will go for negotiations within the shortest possible time with India."


The loan deal is expected to be signed within next two months, the official told the FE.


He said the government is likely to urge India to simplify the terms and conditions for the proposed $4.5-billion loan.


India offered Bangladesh $4.5 billion worth of development assistance by signing a Memorandum of Understanding (MoU) in April this year in New Delhi. Visiting Prime Minister Sheikh Hasina was present at the deal- signing ceremony.


Meanwhile, some government agencies have already undertaken 17 development projects to execute with the LoC-III funds.


The officials said some projects under the LoC-I and LoC-II had been facing difficulties on way to execution due to limited tendering system within the Indian market. The government negotiation team will be cautious about such snags in the case of third LoC.


Firstly in August 2010, India confirmed $862 million worth of LoC-I under which the government had implemented nearly 15 projects.


Bangladesh and India signed another $2.0 billion worth of LoC deal in March 2016.Under the LoC-II the government agencies are executing 14 projects.


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