Indian LoC projects in limbo after uprising

Bangladesh is in a quandary with the Indian Line of Credit (LoC)-funded projects as the contractors and workmen who deserted sites after the fall of past government have yet to join duty despite security assurances, insiders said.

Slow fund release by the lender has also affected the project works over the last few years, which aggravated further in recent months after the takeover by the Professor Muhammad Yunus-led interim government, they said.

"As per the Indian High Commissioner's request, we have made security arrangement for Indian contractors, consultants and relevant manpower at the project sites and workplace in Bangladesh. However, they are yet to join," said a senior Ministry of Finance (MoF) official about the deserters.

More than a month ago, Bangladesh's all LoC project- implementing ministries and the MoF had requested the Home Ministry to ensure adequate security to the Indian consultants and other manpower working in Bangladesh.

However, not a single Indian contractor has come back to Bangladesh and started works, officials at some line ministries told the FE.

Different public agencies, including Bangladesh Railway (BR), have been implementing at least 33 development projects under India's three credit lines worth a total of US$7.36 billion.

According to the borrowing terms and conditions, Bangladeshi project-implementing agencies are to buy 75 per cent of the goods, services or works from India while only 25 per cent from Bangladesh or from the international market.

Currently, the government agencies are implementing two projects under the $862 million worth of LoC-1, some 15 projects under the $2.0 billion LoC-2 and another 16 projects under the $4.5 billion LoC-3.

"We have six ongoing projects at this moment. No Indian contractors have come back at the workplace in Bangladesh. So, their implementation faces delays," Railway Secretary Abdul Baki told the FE.

They have already requested the Home Ministry to arrange special security cover to the Indian manpower in Bangladesh so that they can complete the ongoing projects.

Three senior officials in the LoC-supported three separate project-implementing agencies told the FE that all the project- implementing authorities have appointed the Indian contractor who left Bangladesh just after the ouster of Sheikh Hasina administration on August 5.

But they are not coming back at their job in Bangladesh which has already delayed project works for two months, they said.

A highly placed government source says, "We have been informed that a couple of appointed contractors returned back to Dhaka for joining their works. But the Indian High Commission has not given them security clearance."

A Roads and Highways Department (RHD) official says they are also in trouble with the delays over the Indian LoC-supported projects as the contractors have been absent for long.

"We are struggling with some half a dozen of ongoing projects under the LoC as it takes huge time to get approval for the bid documents, contractor appointment, fund release etc. The terms and conditions of the loan are also very tough. Besides, the lender is very slow in fund release too," he says.

"For example, we are struggling with implementation delays for the Widening of Ashuganj river port-Sarayel-Dhorkhar-Akhaura land port road into 4-lane highways costing Tk71.89 billion due to facing the above-mentioned problems," the RHD official says.

The project, taken in 2017 and the time and cost revised upward, is still not completed. The new completion schedule is June 2025.

Another BR official says their six ongoing projects have been affected a lot due to the absence of contractors and complex approval process from the lender's side.

Among the six LoC-supported projects, the BR is implementing the Construction of Khulna-Darshana railway double line with an involvement of Tk35.07 billion, Rehabilitation of BR's Kulaura-Shahbazpur section at Tk 6.78 billion, Upgrading Parbatipur-Kaunia metre-gauge into dual gauge line at Tk 16.83 billion, and Construction of dual-gauge railway line from Bogra to Shahid Mansur Ali station at Tk 55.798 billion.

Besides, Installation of Khulna-Mongla railway line at Tk 42.26 billion LoC support, and Building of 3rd and 4th line on Dhaka-Tongi sector and dual-gauge double line between Tongi-Joydevpur section at Tk 33.43 billion credit support are also under threat of completion delays due to the absence of the Indian contractors for last two months, the BR official says.

Another senior Ministry of Railway official says: "We have requested Indian lender EXIM Bank about one year ago for releasing necessary funds (project aid).  But New Delhi is yet to reply to us. Our project is struggling for fund shortage."

Meanwhile, Bangladesh has withdrawn some 12 projects in last four years from the Indian LoC facility due to complex terms and conditions binding the loan and the approval process, officials said. 

A senior Economic Relations Division (ERD) official has said the situation is largely attributed to a range of factors like strict loan terms, high demands of contractors, and hassle of taking approval at every point.

New Delhi disbursed only $1.32 billion worth of funds in 12 years up to fiscal year (FY) 2021-22 due to tougher procurement conditions.

The disbursed funds account for only 17 per cent of the total amount pledged in the development-credit line.

The Indian credit bears an interest rate of 1.0 per cent with 0.5-percent commitment fee to be repaid in 20 years with a five-year grace period.

[email protected]