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The Financial Express

India disburses only 12pc of pledged credit so far

| Updated: May 04, 2021 16:18:04


India disburses only 12pc of pledged credit so far

India has disbursed only US$895 million worth of assistance in last one decade against its commitment of $7.50 billion worth of three lines of credit (LoCs) during the period, officials said on Friday.

The slowdown in aid disbursement has affected the execution of nearly 45 projects in Bangladesh between the fiscal year (FY) 2010-11 and FY 2019-20, they said.

In the first eight months (July-February) of the current FY2021, aid disbursement by the neighbouring bilateral donor was also very nominal of $48.28 million, the Economic Relations Division (ERD) data showed.

According to the ERD, Dhaka signed a US$1.0 billion worth of LoC-I loan deal more than 10 years ago in August 2010, a $2.0 billion LoC-II in March 2016 and a $4.5 billion LoC-III deal in 2017 with Indian state-owned EXIM Bank for getting support to different development projects.

The ERD signed a $1.0 billion LoC-I with Exim Bank in August 2010. Of the amount, the neighbouring country later converted $200 million as grant and disbursed it for the construction work of Padma Bridge.

The bank also committed an extra $62 million for LoC-I. The total loans in the first LoC had stood at $862 million.

The FE analysis had found that EXIM Bank disbursed only $895 million worth of assistance in last one decade, 12 per cent of the total $7.50 billion aid commitment.

It had also found that aid disbursement had never crossed even $150 million mark, except a single year in FY2013, over the last one decade.

Insiders said hard terms and conditions and complex procurement procedures had delayed the project execution as well as receiving of Indian assistance from the big chunk of $7.5 billion confirmed credit package.

According to the ERD data, India's record highest aid disbursement was worth $175 billion in FY 2012-13 as an amount of $100 million was included as grant for the construction work of Padma Bridge.

In FY2014, Delhi released $123 million worth of assistance where $50 million was as grant for the construction of Padma Bridge.

Aid disbursement remained below the $100 million mark between FY2015 and FY2018.

Delhi's aid disbursement had again crossed the $100 million mark for the last two consecutive years as the neighbouring country released $137.79 million in FY2019 and $136.38 million worth of aid in FY2020.

Meanwhile, the government of Bangladesh arranged several meetings, at least one in every six months, over the last one decade in a bid to expedite the implementation of the Indian LoC-supported projects and the release of funds.

But the meetings have so far failed to make a significant headway.

Officials involved with Indian LoC-supported projects told the FE that complex development project approval procedure from the Indian side, their stringent procurement policy and limited tendering method are the major reasons for delay in the execution of projects.

Since the project implementation is suffering, confirmed aid was not being released in time, they added.

A Bangladesh Railway (BR) official said: "Firstly, we need approval for the project proposal from the government's highest economic policymaking body-ECNEC. Then we send it to Indian External Affairs Ministry for getting nod. The Indian side usually takes several months to give approval."

"After getting Indian approval, we call tender (limited) within the Indian territory for hiring supplier or contractor. We do not have any option to go for international competitive bidding as 75 per cent of goods, services or works will have to be procured from India," he said preferring anonymity.

The official added: "In many cases, we are forced to cancel tenders even 2-3 times due to inflated cost, Indian bidders submit, higher than our official estimation. Then we go for negotiations with the Indian supplier. It wastes a plenty of time. So, the projects are usually affected. Its cost and time are overrun. In that case, we need to revise the project again. Thus it takes much more time to complete the LoC-supported projects than usual."

"If you look on the projects under the LoC-I, you can see that some projects are still struggling for implementation delays even after passing one decade," another LoC-supported project director at the Bangladesh Railway told the FE seeking anonymity.

Over the last few years, the Indian side was scrutinizing our project and fund release proposals strictly causing delays in fund release in time, project officials said.

Nearly five years after another agreement, India has so far disbursed some $100 million worth of $2.0 billion of the LoC-II. And three years after the $4.5 billion LoC-III agreement, Delhi has disbursed less than $20 million.

A senior ERD official said that 12 projects out of 15 under LoC-I have been completed so far.

However, the implementation of three major infrastructural projects-construction of $308.9 million Khulna-Mongla rail line, construction of $123.1 million 3rd and 4th dual-gauge line on Dhaka-Tongi and a dual-gauge double line on Dhaka-Joydevpur section, and $781 million Kulaura-Shahbazpur railway section rehabilitation project-are still struggling, he added.

Exim Bank's loan commitment for these three projects accounts for more than half of the total $862 million loan.

The ERD official requesting for anonymity said, "It takes lengthy time to get approval from the Indian authorities for initial approval of the project proposals, appointment of consultants and tender documents of construction work resulting in delay of the project's kick-off."

Railway ministry sources said due to long delay in implementation of the construction of Khulna-Mongla Port Rail Line, the cost went up by $80 million.

Like the first LoC, the implementation of the second and third LoC projects are also struggling for implementation delays due to the lengthy project proposal approval process by the Indian side.

After signing of the LoC-II deal with Indian Exim Bank in March 2016, ERD officials said, the lender took nearly three years to give green signal for the 15 Bangladeshi projects.

The government has already approved 13 projects, to be financed by the second LoC, at the meeting of the Executive Committee of the National Economic Council (ECNEC).

Commercial agreements have so far been signed with Indian companies only for five and the rest projects are still at their initial stage.

Of the 16 projects of the third LoC, India has only initially approved four projects including solar-based power station, infrastructure power evacuation facilities of Rooppur Nuclear Power Plant, setting up of Hi-Tech Park and Mansur Ali Hospital in Sirajganj.

However, a number of important infrastructural projects under the LoC-III are still awaiting approval.

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