Indian LoC disbursement remains slow despite series of bilateral meetings

FT ONLINE

Multiple meetings between Bangladesh and India are held every year to identify implementation challenges in the projects financed by Indian loans. 

But the meetings have not produced any significant results.

The disbursement of Indian Lines of Credit (LoC) have been slow, although the challenges were discussed in these meetings. Sources present at the meetings blamed this on the excessive bureaucracy on the Indian side.

Nine years after the signing of the first LoC with the Export-Import Bank of India, only 64 percent or $551.28 million of the committed $862 million has been disbursed. 

The complexity in the implementation of three ongoing big projects is the reason behind slow disbursement.

Nearly four years after another agreement, India has so far disbursed $47.53 million of the $2 billion of the second LoC. And two years after the third LoC agreement promising $4.5 billion, India has only disbursed $1.25 million. 

However, this loan is being used in a project that was supposed to be funded by the first LoC.

The 16th meeting of the Joint Monitoring Team (JMT) started in Delhi on Monday. 

A 10-member delegation led by Nilima Akter, Additional Secretary to the Prime Minister's Office, is taking part in the two-day long meeting. Joint Secretary of the Ministry of External Affairs Ajay Kumar is leading the Indian delegation. 

Senior officials of Exim Bank (India) were also present at the meeting. Representatives from the implementing agencies, various ministries and departments also attended the meeting, said sources.

To speed up the Indian LoC financed projects, the JMT has been holding a meeting every three months since 2017. Also, the LoC review meeting has been held twice every year since 2012.

The challenges of each project are discussed separately in these meetings. But there have been no solutions to the identified problems.

Economic Relations Division (ERD) officials said the 14th JMT meeting was held during July 2-3 at the ERD. The previous meeting was held in Delhi on December 12 and 13. The next meeting will be held in Dhaka.

In the last fiscal year, Exim Bank (India) disbursed $140 million, which was higher than any previous fiscal year. The bank has disbursed $55.34 million in the current fiscal year so far.

The ERD signed a $1 billion LoC with Exim Bank (India) on August 7, 2010. Of that amount, the neighbouring country later disbursed $200 million.

The bank committed an extra $62 million for the first LoC. The total Indian loans in the first LoC stood at $862 million.

ERD officials said that of the 15 projects of the first LoC, 12 have been completed. However, the implementation of the three major infrastructural projects is slow. 

Exim Bank's loan commitments for these projects account for more than half of the total loan. 

The three projects are the construction of the $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.

Of the 15 projects financed by the first LoC, eight of the projects completed within three years were about the purchase of buses and railway bogies and engines from India.

According to the terms of the agreements, the raw materials and machinery of these projects were supplied from India. To serve its interest, India is giving a go-ahead signal to the projects which involve selling of products.

But the development projects of Bangladesh are facing setbacks because of delay in Indian authority's approval and negligence of the Indian contractor organisations.

The ERD officials said it takes time to time to get the approval of the Indian authorities for the initial approval of the project proposal, appointment of consultants and tender documents of construction work. Because of this, starting the project takes a lot of time.

At the implementation stage, it observed that the Indian contractor companies are not working fast. 

Also, there have been no results even after the concerned ministry told the Indian companies that they are "not doing enough". Additionally, the project manager does not have the power to finance the project – that lies with the Exim Bank (India).

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

Exim Bank has preliminarily agreed to grant the loan. The ERD sources said the issue would be finalised at the ongoing 16th JMT meeting.

According to a report of the Bangladesh Railway, the complications surrounding the construction of the Khulna-Mongla rail line remains unresolved. The progress of Indian contractor organisation Ircon International Limited is not satisfactory. 

The issue was reported to the Indian High Commission in Dhaka.

A contract was signed with Ircon on February 23 for the construction of the bridge and tracks of the project. Despite placing work order and advance payment to the contractor, the required manpower and equipment arrived at the project site with considerable delay. 

Although the railway ministry had asked Ircon several times to speed up its work, there has been no result. The Indian contractor orgnisation, recently, supplied low-quality railway sleeper, said project director Mohammad Ramzan Ali.

Like the first LoC, the implementation of the second and third LoC projects are still being delayed due to the late approval from India. 

After the signing of an agreement with Exim Bank (India) on March 8, 2016, it took the 15 projects under the second LoC three years to get approval. The government has already approved 13 projects, to be financed by the second LoC, at the meeting of the Executive Committee of National Economic Council.

Commercial agreements have been signed with Indian companies only in four projects. 

Of these, $47.53 million have been disbursed for double-decker buses and single-decker air-conditioned (AC) and non-AC buses, buying trucks for the Bangladesh Road Transport Corporation, buying road renovation and repairing equipment, and setting up of hi-tech parks. Rest of the projects have not yet reached the implementation stage. 

Meanwhile, of the 16 projects of the third LoC, India has only initially approved four projects. 

Bangladesh signed the third LoC agreement with India on October 7. Of these, India greenlit only four projects, including solar-based power stations, 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 third LoC still await approval.

The projects are the construction of Bay Container in Chattogram, multipurpose terminal at Payra, modernisation of the Mongla port, and Special Economic Zones (SEZ) in Mirsarai (Indian SEZ). After getting approval, commercial agreements for these projects will be signed.

"LoC disbursement was slow in the past. But after a series of bilateral meetings, it has become faster and will be even quicker in future," Monowar Ahmed, secretary of Economic Relations Division (ERD) said.