Indian Line of Credit: Fresh $5b likely amid slow use of previous $3b

Bangladesh has been slow in using up the previous $3 billion of Indian credit due to procedural flaws mainly on Dhaka's part.

Until last month, India disbursed a little over 50 percent of the $1.06 billion loan it sanctioned in August 2010. And the disbursement of the second credit of $2 billion approved in March 2016 is yet to begin, finance ministry data show.

Bangladesh is responsible for this delay, thanks to the lengthy process for finalising projects as well as complications related to land acquisition, ministry officials said.

Against this backdrop, India is likely to open a fresh $5 billion credit line for Bangladesh. 

Of the first loan, $200 million was channelled to the Padma bridge project in grant. New Delhi later provided another $62 million after the cost of several projects rose. The total amount of credit finally stood at $862 million, of which $353 million has been received.

Of the sum, $240 million was spent under nine projects to buy buses, passenger coaches, wagons, locomotives and a dredger from India.

Five other projects were taken up to develop railway infrastructures. Only one of them -- construction of rail bridges over the Bhairab and Titas rivers -- is nearly completed. 

Implementation of two other projects -- construction of 3rd and 4th line between Kamalapur Railway Station and Tongi and construction of Khulna-Mongla rail line with a bridge over the Rupsa river -- have been delayed for difficulty in acquiring land.

Implementation of the Khulna-Mongla rail line project can now start after the issues blocking the project have been resolved recently.

The progress of another project for modernising and strengthening Bangladesh Standards and Testing Institute is also slow.

With the second line of credit, 14 projects are to be implemented; but only three have been finalised. 

The 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, repair and maintenance from India.

The rest 11 projects yet to be finalised were approved by the Exim Bank of India. Their estimated cost is $1.7b, finance ministry officials said. 

Among them are three railway projects -- a double line track in Khulna-Darshana section, extension of Saidpur Railway Workshop and conversion of Parbatipur-Kawnia metre gauge line into dual gauge.

Development of an economic zone for Indian businessmen and construction of Ashuganj inland container river port are also on the list.

Of the expected $5b fresh loan, $4.5b will be given for various development projects, including economic zones, ports and road infrastructures, and river restoration, a finance ministry official told The Daily Star.

The remaining $500m will be made available for defence procurement, the official said, but could not provide any details.

After discussions, the two countries have come up with 17 projects to be funded by the new credit. Around $1b will be spent on the infrastructure development of Rooppur Nuclear Power Plant Project alone.

This time India will also provide credit for upgrading 245km roads -- Benapole-Jessore-Narail-Bhanga (135km), Ramgarh-Baruerhat (35km) and Maynamati-Brahmanbaria-Sarail (75km) -- considering transit and transshipment facilities and the operation of Chittagong and Mongla ports.

Like for the two previous loans, the interest rate of the new credit is one percent. Conditions will also be similar, such as the contractors should be hired from India and majority of the goods should be bought from there.