Bangladesh’s utilisation of Indian lines of credit has been nothing more than a sorry state of affairs in the past seven years.
Over the period, Dhaka has witnessed renewed vigour in New Delhi’s commitments to financing projects with credits doubling and redoubling.
On top of two LoCs involving $3.06 billion that India already committed, a third one amounting to $4.5 billion is now in the pipeline.
But since 2010, Bangladesh could use only $576 million until last month.
A grim picture of the LoC utilisation surfaces at a time when India is all set to open the third and biggest yet LoC for Bangladesh through signing of an agreement during Indian Finance Minister Arun Jaitley’s three-day Dhaka visit beginning on Tuesday.
Bangladesh finance ministry officials attributed the sluggish fund utilisation to delays in project selection, approval process, tender procedure, project design finalisation and loan agreement signing with Indian Exim Bank and complexity in land acquisition.
Economic Relations Division Secretary Kazi Shofiqul Azam told The Daily Star on Thursday, “On our part, if we can speed up the work, the implementation will be faster.”
Many projects under the second LoC still could not be readied by the ministries concerned. In future, the secretary said, they will try to disburse 20 percent of the project money every year, which is a standard performance criterion.
ERD has asked all parties to work accordingly.
Regarding the third LoC, Shofiqul Azam said they already completed the project selection to reduce delays. He hoped that the project implementation rate will increase in future.
Until last month, India disbursed around 60 percent of its first LoC of $1.06 billion, sanctioned in August 2010.
And the disbursement of the second LoC of $2 billion, committed during Indian Prime Minister Narendra Modi’s Dhaka visit in June 2015 and approved in March 2016, is yet to begin, finance ministry data show.
A third LoC involving $4.5 billion was initiated during Prime Minister Sheikh Hasina’s India visit in April this year.
Of the first loan, $200 million was channelled to the Padma bridge project as grants.
New Delhi later provided another $62 million after the cost of several projects rose. The total amount of project credit finally stood at $862 million, of which $376 million has been received till last month.
Of the sum, $240 million was spent under nine projects to buy buses, passenger coaches, wagons, locomotives and a dredger from India. Three other projects were almost completed.
Implementation of three remaining projects — construction of Dhaka-Tongi-Joydevpur dual gauge rail line and construction of Khulna-Mongla rail line with a bridge over the Rupsa River — have been delayed for difficulties in acquiring land.
The allocation for Dhaka-Joydevpur rail line was $123 million and only $0.13 million of it has been spent. Of $78 million for Kulaura-Shahbazpur dual gauge rail line project, $0.12 million has been spent. The Khulna-Mongla rail line project got $308 million allocation but only $43 million was used.
A finance ministry official said implementation of the Khulna-Mongla rail line project can now start as the issues blocking the project have been resolved recently. The work on the project has begun but the problem regarding Dhaka-Joydevpur dual gauge rail line has not yet been solved.
With the second LoC, 14 projects are to be implemented and Indian Exim Bank approved 12 of those.
About one and a half years after signing of the loan agreement, only three projects were approved by the Executive Committee of the National Economic Council (Ecnec). Now the process of tender document preparation is on.
The three ready-to-be-implemented projects involve procurement of trucks and buses for Bangladesh Road Transport Corporation as well as equipment and machinery for road construction and repair and maintenance of road infrastructures. Indian allocation for these three projects is $136 million.
Of the nine other projects, Ecnec approved improvement of Ashuganj River port to Akhaura land port road as four lane national highway where Indian allocation is $283.67 million.
Besides, Ecnec has approved construction of two out of five medical colleges under a project of the health ministry.
The two medical colleges will be built at Patuakhali and Jamalpur; Indian allocation for this is around $70 million.
Under the third LoC, 17 projects have primarily been selected and Indian Exim Bank has consented to those. Finance ministry officials say that to expedite the implementation, the projects were selected before signing of the local agreement. However, the projects have not yet been readied for implementation.
As per the rules, the implementation of any project starts only after Ecnec okays it. But not a single project has been approved by Ecnec after signing of the primary deals during Hasina’s India visit in April.
Of around $4.5 billion under the third credit deal, $1b will be spent on the infrastructure development for power evacuation facilities of Rooppur Nuclear Power Plant. When the power plant will generate electricity, a line will be set up to supply the power to the national grid.
This time India will also provide credit for upgrading 245km roads — Benapole-Jessore-Narail-Bhanga (135km), Ramgarh-Baruerhat (35km) and Mainamati-Brahmanbaria-Sarail (75km) — considering transit and transshipment facilities and the operation of Chittagong and Mongla ports.
At least three of the projects involve the development of economic zones, a priority for the Bangladesh government as it looks to ramp up private sector investment.
Of the total amount of the credit, about $500 million will be used for setting up new economic zones for Indian and other investors, according to officials of the finance ministry and Bangladesh Economic Zones Authority.
Some $100 million will be provided for building a dedicated economic zone spanning 1,005 acres in Mirsarai of Chittagong for the neighbouring country’s investors — a move that has been hailed by Narendra Modi.
Another $100 million may be used for developing a special economic zone at Payra or Moheshkhali; $300 million may be allocated for developing infrastructure of different economic zones.