Indian LoC Funding Hurdles: Over 16 projects worth $3.0b being axed shortly

At least 16 development projects worth some US$3.0 billion under an Indian credit scheme for Bangladesh are being discarded shortly due to funding hurdles on the lender's part, officials said.

The current interim government has formed a technical committee comprising members from the ministries and agencies concerned and it is working to make an exit plan for the projects on drop list.

"The committee is already working to accumulate reports regarding the projects with necessary information to facilitate the Economic Relations Division (ERD) to finalise the exit plan for the projects," an ERD official said Friday.

"If we do not find any binding on the way to scrapping the projects, we will do that immediately," he added.

Bangladesh's post-uprising government and the Indian side recently agreed to delist those projects for streamlining the execution of the remaining ones amid the emerging impediments, they said.

The ERD earlier had sought report from the implementing ministries and agencies relating to legal and administrative bindings on their ongoing LoC-supported projects, said a senior government official.

Following the political changeover in August last year, works on multiple India-funded projects came to a standstill. Particularly, the Indian contractor of the Ashuganj-Akhaura four-lane road- construction project returned home along with the Indian workers, leading to a four-month halt in the project.

Besides, India cut down Bangladesh's foreign-aid allocations by 40 per cent in its national budget for the fiscal year (FY) 2024-25 as it trimmed down its overall allocations, Indian newspapers reported.

Bangladesh was proposed to receive maximum INR 1.20 billion in the FY2025 from that of INR 2.0 billion in the previous FY 2023-24.

There are some more projects where Indian contractors halted or slowed down their works, said ERD officials, describing the main reason behind the sluggish fund clearance under the LoC.

An ERD official told the FE that they had meeting with the Indian External Affairs Ministry and their Exim Bank on the LoC-supported struggling projects.

Now the Bangladesh and Indian sides have agreed to cut out those projects which are still in the initial stages under the $862 million worth LoC-1, $2.0 billion worth LoC-2 and $4.50 billion worth of LoC-3.

Out o the selected 16 projects planned for scrapping, most mainly lie under the Indian LoC-2 and LoC-3 financing schemes.

Under the three LoCs, 40 projects for roads, railways, shipping, energy, and infrastructure development have been undertaken. Of these, 15 projects have been completed, 8 are ongoing, and the remaining ones are either in the process of selecting consultants and contractors or preparing proposals.

According to ERD data, the Indian lender Exim Bank disbursed only $163.19 million worth of loans during July-May period in the immediate-past FY2025 while $311.4 million in the previous FY2024.

Meanwhile, in a pregnant pause, India had not made commitment for a single penny in the 11 months of the last FY2025.

In the previous two fiscals - FY2023 and FY2022--the Indian lender disbursed $337 million and $329.3 million worth of loans, respectively, the official statistics showed.

Insiders say most of the projects planned for dropping have hardly made any progress due to delays in selecting consultants or for a lack of approval from the Indian side.

Some projects were supposed to be implemented as a continuation of another project.

Of these projects, Bangladesh Railway has already decided to shelve Parbatipur-Kaunia and Khulna-Darsana rail-track-development projects but agreed to look for funding for Sirajganj-Bogura dual-gauge project, considering the significance of the communication line.

Other projects like Syedpur Railway Workshop, Mongla Economic Zone, and Bangabandhu Sheikh Mujib Industrial City Syedpur Airport, Payra Port Terminal, and several infrastructure projects were at the approval stages.

kabirhumayan10@gmail.com