Dhaka wants softer procurement terms for India's line of credit projects

FHM HUMAYAN KABIR | Thursday, 14 October 2021

Dhaka may stress relaxing procurement conditions binding use of India's Line of Credit at the upcoming review meeting as local implementing agencies tumble over hard terms in executing the LoC projects, officials said.

Bangladesh will seek authority to purchase more than one-third of goods and works from the local market instead of the Indian side as many projects are facing hurdles with execution, a senior Economic Relations Division (ERD) official said Wednesday.

As per current terms and conditions, Bangladesh is bound to procure 75 per cent of goods, works and services from the Indian market through limited-tendering method and only 25 per cent (one-fourth) locally.

The ERD official said they would request New Delhi at the next tripartite LoC review meeting, scheduled to be hold on October 27-28 in Dhaka, for relaxing the strings.

Meanwhile, India can agree to 35-per cent procurement from Bangladesh instead of ongoing provision of 25 per cent, especially for the infrastructure-dominated projects, at the upcoming review meeting, another ERD official told the FE.

"Bangladesh over the last couple of meetings had requested India to soften the terms and conditions," the ERD official said.

Officials of the ERD, the Indian External Affairs Ministry and the project-implementing agencies are taking part in the tripartite meeting set for October 27-28.

An ERD Additional Secretary and a Joint Secretary at the Indian External Affairs ministry would lead the two sides at the talks.

When asked, ERD additional secretary Shahriar Kader Siddiky told the FE that they were hopeful of resolving all the issues in the next review meeting

They would also request the Indian side to expedite the aid disbursement and settle the hurdles on way to execution of the projects, he said.

Another ERD official said the ongoing projects under the three Indian LoCs worth $7.4 billion are facing some hurdles with multiple problems which they would try to get settled through the tripartite discussion.

Currently, Bangladesh is implementing three projects under $862 million LoC-I, 14 projects under $2.0 billion LoC-II and 17 projects under $4.5 billion LoC-III.

Dhaka had signed agreement with Indian EXIM Bank for the $862 million LoC-I in 2010, the $2.0 billion LoC-II in March 2016 and the $4.5 billion LoC-III in October 2017.

Meanwhile, 12 of the 15 projects under the $862-million-worth LoC-I have been completed, except three that are as old as 10 years.

Projects under both the LoC-II and LoC-III have been laggard.

Couple of PDs told the FE that one of the major issues affecting the projects is complexity in tendering and the "irresponsibility" of Indian contractors during the implementation phase.

Another decelerator is the procurement conditions under which Bangladesh must purchase 75 per cent of works, services or goods from the Indian market, they said.

A Roads and Highways Department Project Director (PD) in Dhaka said Bangladesh needs to import three-fourths of the total construction materials, including bricks and sand, from India, which automatically increases costs.

"This issue has thrown a wrench into the implementation of many LoC projects," he added.

Another PD at Bangladesh Railway said sometimes the Indian suppliers submit bids at costs far higher than estimated by the Bangladeshi procuring entities (government agencies), resulting in execution delays.

When asked, the ERD additional secretary said they were hopeful of resolving all the complexities in the next meeting.

The Indian development credits bear an interest rate of 1.0 per cent with 0.5 per cent commitment fees. It will have to be repaid in 20 years with a five-year grace period.

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