Bangladesh and India will hold talks today in Dhaka to resolve the unsettled issues before striking a new deal for Indian US$2bn line of credit (LoC). India offered new LoC in early June during the Indian Prime Minister Narendra Modi’s two-day state visit to Bangladesh. Since then, negotiation continues between the two countries, but both sides are yet to reach any consensus about procurement of goods and services from both the countries, consultant appointment, seller selection, tax, VAT and procurement guidelines to execute 13 projects under the LoC. On the use of goods and services, Bangladesh decided to propose reducing procurement of Indian goods and services to 65% or below it for civil works-related projects and more reduction for other projects. Under the LoC, India primarily said a minimum of 75% goods and services need to be Indian origin and must be procured from India. In response to it in July, Bangladesh proposed India that 60% goods and services will be procured from India while the rest 40% from Bangladesh, and 50% construction materials like brick, sand and cement will be procured from India and 50% from Bangladesh. On this proposal, India replied that for all the projects, it would not be possible to cut the proposed procurement share but terms and conditions could be project-based like first LoC. 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 loan amount to buy equipment and services from Indian entities. Both countries, however, agreed on forming a joint venture company for taking recommendation services. But in this case, Indian Consultant Company will play a lead role. On the point of project management consultant (PMC), the meeting decided to negotiate further. Earlier, in response to Bangladesh’s proposal to make it optional, and if needed, Bangladesh could appoint own-financed PMC from anywhere in the world. In response to it, India replied that it is important to appoint PMC in a critical project-related civil works under LoC. So, appointment of PMC should not be made optional. On the re-payment date, Bangladesh agreed on India’s proposal on fixing re-payment date after first installment of the loan. Further discussion will be on seller selection, as earlier Bangladesh proposed that Bangladesh usually accomplishes all civil procurements in line with the internationally recognised rules in response to India’s seeking explanation on omission of two words – transparent and fair – from the deal. On payment of customs duty, VAT and tax, Bangladesh also decided to discuss further and said Indian must pay all personal and corporate taxes as per the country’s rules. Earlier, India 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 proceeding by court, specimen signature and amortization schedule. India offered the new LoC at 1% interest and 0.5% 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 $1bn credit deal with India to support Bangladesh’s development works. Of which, $800m has so far been released. Among the proposed 13 projects for fresh LoC are setting up of double railway tracks in Khulna-Darshana line, converting the Parbatipur-Kauniametre-auge (MG) line to a dual-gauge track, upgrading the Syedpur railway workshop.
