When India sent the draft agreement to Bangladesh in August this year, it stipulated that at least 75 percent of the credit must be utilised to import goods and services from India. It even included consultancy services under the project.
But the neighbouring country now considers cutting the size of the import content of the credit line to 65-75 percent of overall procurement. For some cases, India is ready to bring it down further.
“Relaxation on the minimum Indian content may be done on a case-to-case basis and not for the entire line of credit. The same practice is being followed in the first line of credit,” said the Exim Bank of India, which is responsible for disbursing the loan.
The bank agreed to offer the flexibility while commenting on the opinions about the draft agreement from Bangladesh's side.
India also agreed to cede more control to Bangladesh over establishing joint ventures aimed at providing consultancy services. Now, a Bangladeshi firm can have 49 percent stake in a JV, with an Indian firm being the lead partner.
It came after the Economic Relations Division of Bangladesh took opinions from different ministries about the Indian government's plans and forwarded their opinions to Exim Bank.
When contacted, ERD Secretary Mohammad Mejbahuddin said the import content would remain flexible. It will also be possible to increase the use of local content to higher level on a case-to-case basis.
He said locally available goods such as sand and rocks would not be imported.
“The negotiation is almost complete. We hope we would be able to ink the deal this year,” Mejbahuddin said.
He said the projects that would get financing from the second Indian credit line have almost been finalised, with the preparation work for the projects already on way.
As a result, the implementation of the projects would get pace this time, he added.
Exim Bank sent the draft agreement following Indian Prime Minister Narendra Modi's visit to Bangladesh in June this year.
During his visit a preliminary agreement was signed on the new credit.
Under the draft agreement, Bangladesh will have to pay 0.5 percent as commitment fee annually on the amount of the credit that remains undisbursed.
The unutilised portion of the credit will be cancelled at the end of 48 months after the scheduled completion date in case of project exports. It has been set at 72 months in case of other supply contracts.
The credit carries 1 percent interest rate with repayment period of 20 years and a grace period of five years.
Bangladesh has identified 13 projects to be financed by the second Indian loan, said an ERD official. It includes power, rail and port projects.
India lent a $1 billion line of credit in 2010, during Manmohan Singh's tenure as the prime minister. Of the amount, $200 million was later converted to grant and disbursed for the Padma bridge project.
Bangladesh sought $62 million more under the first loan as project costs increased and the Indian side agreed to it as well.
