Bangladesh is all set to sign the final $4.5 billion third Line of Credit (LoC) agreement with India on Wednesday as Indian Finance Minister Arun Jaitley arrived here on Tuesday to witness the signing.
As many as 17 projects have been identified for funding with the new line of credit, all of which got the green light from Indian Exim Bank.
“Both the countries will give more emphasis on transparency and integrity than the conditions for implementation of projects under the 3rd LoC to ensure the quality of works and expedite the implementation of projects,” an Economic Relations Division (ERD) official told UNB.
In the finalisation process of the agreement, the official said, India agreed to relax the conditions to avoid the bottlenecks in project implementation under the third LoC.
The agreement is likely to be signed by ERD Secretary Kazi Shofiqul Azam and Managing Director of Indian Exim Bank on Tuesday at the Ministry of Finance in presence of Bangladesh Finance Minister AMA Muhith and Indian Finance Minister Arun Jaitley.
Arun Jaitley arrived here on Tuesday on a three-day official visit at the invitation of his Bangladesh counterpart AMA Muhith to discuss various issues, including the quick implementation of the $4.5 billion loan for development projects and another $500 million for defence-related procurements.
During Bangladesh Prime Minister Sheikh Hasina’s last visit to India in April last, Prime Minister Narendra Modi announced a $ 5 billion line of credit to Bangladesh.
Talking to UNB, another ERD official said Modi promised to give a fresh $4.5 billion line of credit to Bangladesh during Prime Minister Sheikh Hasina’s visit to India in April to take the neighbouring country’s total commitment since 2010 to $7.5 billion.
The Dollar Credit Line Agreement for implementation of this third Line of Credit is expected to be signed in the presence of the Finance Ministers of India and Bangladesh on October 4, 2017.
This will bring the total quantum of credit lines extended by India to Bangladesh over the last six years to US$ 8 billion.
Signing of the Third Dollar Credit Line Agreement will enable the implementation of a number of key infrastructure priority projects in Bangladesh, an official told UNB.
Besides, the ‘Joint Interpretative Notes on the Agreement between India and Bangladesh for the Promotion and Protection of Investments’ will be signed in the presence of the two ministers.
At present, 65 percent of the overall procurement for public work projects must be made from India. But, under the new line of credit, the import content can be lowered on a project-to-project basis.
However, in case of service-oriented projects, 75 percent of the procurement must be made from the neighbouring country, which is the same as before.
The official also said the memorandum of understanding (MoU) signed earlier between India and Bangladesh for the third LoC did not mention any conditions.
He said the terms and conditions for utilising the third Indian LoC will be included in the agreement to be signed between India and Bangladesh.
Earlier, the Indian side had proposed retaining all the terms and conditions as before. But, Bangladesh urged India to reduce the procurement conditions to implement the projects as soon as possible.
Of that 3rd LoC amount, $4.5billion will be given for various development projects, including economic zones, ports and road infrastructures, and river restoration. The two countries have already come up with 17 projects to be funded by the new credit. The remaining $500 million will be made available for defence procurement.
Former Indian PM Dr Manmohan Singh had announced the first LoC of USD 1 billion during his visit to Bangladesh in 2010.
Later, Modi had announced the second LoC of USD 2 billion during his visit to Bangladesh in 2015.
The sources said the terms and conditions were not incorporated in the MoU, though the Indian side had proposed their inclusion.
Under the Indian proposal, the interest rate will be one percent with a five-year grace period and a 0.5 percent commitment fee.
As per the Indian proposal, as per the sources, a maximum of 65 percent of procurement for the projects will have to be made from India.
The Exim Bank of India has obtained all the necessary approval from different government organisations to open its representative office in Dhaka.
The possible projects to be covered under the Indian 3rd LoC include the Buriganga river (new Dhaleswari-Pungli-Bangshi-Turag-Buriganga river system) restoration project ($ 196.18 million), the Ashuganj-Zakiganj route ($38 million), the Payra port dry bulk coal terminal ($300 million), the Payra port multipurpose terminal ($350 million), construction of a new dual-gauge rail line from Bogra to Shahed M Monsur Ali Station in Sirajganj ($501.23 million), development of rail- and road-based inland container depot (ICD) at Ishurdi ($35 million), upgrade of land customs stations (LCSs) to integrated check posts (ICPs) on both sides (no estimate yet), construction of an economic zone at Mirsarai ($50 million), Bogra-Jharkhand (India) 400-kv transmission line project ($177.04 million), Mollahat 100 MW solar PV power plant ($157.68 million), Gazipur 450-MW combined cycle power plant ($402.41 million), infrastructure development for power evacuation facilities of Rooppur Nuclear Plant ($ 940 million), four-laning of Comilla-Brahmanbaria-Sarail road ($75 million), establishment of special economic zone ($ 300 million) and development of a BEZA special economic zone in Payra or Moheshkhali ($ 100 million).