Parleys still on over $2bn Indian LoC

Negotiations are still on to strike a draft agreement on the second USD 2 billion Indian line of credit (LoC), which was promised by the Narendra Modi government to Bangladesh some four months ago.
In the latest round of inter-ministerial meetings, held on October 11, Bangladesh has decided to negotiate further on issues that have not been settled, including procurement of goods and services from both countries, appointment of consultants, selection of sellers, and guidelines on taxes, value added tax (VAT) and procurement, so as to execute 13 projects under the LoC.
On the use of goods and services, the meeting decided to propose reducing the procurement of Indian goods and services to 65 per cent or below for civil works and further reduction for other projects.
Under the LoC, India primarily said a minimum of 75 per cent of goods and services needed to be of Indian origin and must be procured from India. In response, in July, Bangladesh had proposed to India that 60 per cent of goods and services would be procured from India and the remaining 40 per cent from Bangladesh, while 50 per cent of construction materials—like brick, sand and cement—will be procured from India and 50 per cent from Bangladesh.

On this proposal, India replied that for all projects, it would not be possible to cut the proposed procurement share, but terms and conditions could be project-based, as in the first LoC.
The LoC is a promise to provide loans at subsidised rates from agencies such as Exim Bank of India.
These are normally conditional on the recipient using the amount of the loan to purchase equipment and services from Indian entities.
Both countries, however, agreed to form a joint venture company for taking recommendation services. In this case, however, the Indian consultant company will play the role of a lead agency.
On the point of a project management consultant (PMC), the meeting decided to hold further negotiations. Earlier, in response to Bangladesh’s proposal to make it optional and, if needed, Bangladesh can appoint its PMC, financed by itself, from anywhere in the world, India replied that it is important to appoint a PMC in a critical project-related civil works under the LoC. So, the appointment of PMC should not be optional, it reiterated.
Regarding the date of repayment, Bangladesh agreed to India’s proposal to fix the re-payment date after the first instalment of the loan.
The meeting laid emphasis on further discussions on seller selection, as earlier Dhaka had proposed that Bangladesh usually accomplishes all civil procurement in line with internationally recognised rules, in response to India seeking an explanation on the omission of two words—transparent and fair—from the deal.
On the payments of Customs duty, VAT and tax, the meeting decided to discuss this further, and was told that India must pay all personal and corporate taxes in accordance with the country’s rules.
Earlier, India had requested Bangladesh to re-think about not giving tax and VAT waiver for its individuals and companies.
Both sides agreed to handle the letter of credit issue, borrower’s liability, immunity for the borrower, legal proceedings by the court, specimen signature and amortisation schedule.
India had offered a new LoC at 1 per cent interest and 0.5 per cent commitment fee (on undisbursed amount). The loan will have to be repaid in 20 years with a five-year grace period.
In August 2010, Bangladesh signed the first USD 1bn credit deal with India to support Bangladesh’s developmental works. Of this, USD 800m has so far been released.
The proposed 13 projects for a fresh LoC are: setting up double railway tracks on the Khulna-Darshana line, converting the Parbatipur-Kaunia metre-gauge line to a dual-gauge track, upgrading the Syedpur railway workshop, installation of Barapukuria-Bogra-Kaliakor 400-kilovolt power transmission line, procurement of 500 trucks and 500 buses for the Bangladesh Road Transport Corporation (BRTC), procurement of modern equipment to upgrade the Roads and Highways Department, setting up four medical colleges and hospitals and a National Burns and Plastic Surgery Institute, construction of 49 polytechnics and teacher-training institutes, upgrading of the Ashuganj river container port, and improvement of the Ashuganj river port-Akhaura road. Two other projects under the information and communications technology (ICT) ministry are also included in the list.

Parleys still on over $2bn Indian LoC

Negotiations are still on to strike a draft agreement on the second USD 2 billion Indian line of credit (LoC), which was promised by the Narendra Modi government to Bangladesh some four months ago. In the latest round of inter-ministerial meetings, held on October 11, Bangladesh has decided to negotiate further on issues that have not been settled, including procurement of goods and services from both countries, appointment of consultants, selection of sellers, and guidelines on taxes, value added tax (VAT) and procurement, so as to execute 13 projects under the LoC. On the use of goods and services, the meeting decided to propose reducing the procurement of Indian goods and services to 65 per cent or below for civil works and further reduction for other projects. Under the LoC, India primarily said a minimum of 75 per cent of goods and services needed to be of Indian origin and must be procured from India. In response, in July, Bangladesh had proposed to India that 60 per cent of goods and services would be procured from India and the remaining 40 per cent from Bangladesh, while 50 per cent of construction materialslike brick, sand and cementwill be procured from India and 50 per cent from Bangladesh. On this proposal, India replied that for all projects, it would not be possible to cut the proposed procurement share, but terms and conditions could be project-based, as in the first LoC. The LoC is a promise to provide loans at subsidised rates from agencies such as Exim Bank of India. These are normally conditional on the recipient using the amount of the loan to purchase equipment and services from Indian entities. Both countries, however, agreed to form a joint venture company for taking recommendation services. In this case, however, the Indian consultant company will play the role of a lead agency. On the point of a project management consultant (PMC), the meeting decided to hold further negotiations. Earlier, in response to Bangladeshs proposal to make it optional and, if needed, Bangladesh can appoint its PMC, financed by itself, from anywhere in the world, India replied that it is important to appoint a PMC in a critical project-related civil works under the LoC. So, the appointment of PMC should not be optional, it reiterated. Regarding the date of repayment, Bangladesh agreed to Indias proposal to fix the re-payment date after the first instalment of the loan. The meeting laid emphasis on further discussions on seller selection, as earlier Dhaka had proposed that Bangladesh usually accomplishes all civil procurement in line with internationally recognised rules, in response to India seeking an explanation on the omission of two wordstransparent and fairfrom the deal. On the payments of Customs duty, VAT and tax, the meeting decided to discuss this further, and was told that India must pay all personal and corporate taxes in accordance with the countrys rules. Earlier, India had requested Bangladesh to re-think about not giving tax and VAT waiver for its individuals and companies. Both sides agreed to handle the letter of credit issue, borrowers liability, immunity for the borrower, legal proceedings by the court, specimen signature and amortisation schedule. India had offered a new LoC at 1 per cent interest and 0.5 per cent commitment fee (on undisbursed amount). The loan will have to be repaid in 20 years with a five-year grace period. In August 2010, Bangladesh signed the first USD 1bn credit deal with India to support Bangladeshs developmental works. Of this, USD 800m has so far been released. The proposed 13 projects for a fresh LoC are: setting up double railway tracks on the Khulna-Darshana line, converting the Parbatipur-Kaunia metre-gauge line to a dual-gauge track, upgrading the Syedpur railway workshop, installation of Barapukuria-Bogra-Kaliakor 400-kilovolt power transmission line, procurement of 500 trucks and 500 buses for the Bangladesh Road Transport Corporation (BRTC), procurement of modern equipment to upgrade the Roads and Highways Department, setting up four medical colleges and hospitals and a National Burns and Plastic Surgery Institute, construction of 49 polytechnics and teacher-training institutes, upgrading of the Ashuganj river container port, and improvement of the Ashuganj river port-Akhaura road. Two other projects under the information and communications technology (ICT) ministry are also included in the list.