Pranab's package
Sign, sealed and delivered
by Badiul Alam
The Indian credit line of US$1 billion has stirred fresh debate in the country's political arena. The deal was inked on August 7 during the four-hour brief visit of Indian Finance Minister Pranab Mukherjee. Secretary, Economic Relations Division, Mosharraf Hossain Bhuiyan and Chairman Exim Bank of India TCA Ranganathan signed the deal in presence of Finance Minister Abul Mal Abdul Muhit, Food Minister Dr. Abdur Razzaque, Pranab Mukherjee, Prime Minister's Economic Adviser Dr. Mashiur Rahman and other senior officials of the two sides.
The credit bears 1.75 per cent interest per annum with 0.5 per cent service charge for non-utilization of the fund in time. Multilateral development partners like the World Bank and the Asian Development Bank (ADB) impose such service charges. India always opposed the imposition of such service charges in the international forum, but have used the same instrument when in comes to Bangladesh whom they consider as one of their favoured nations.
The credit line from a single source is big, but it is not so big compared to the size of Bangladesh's economy or GDP, which is more than US$90 billion. In taka currency the size of Indian credit is around seven thousand crore. Such an amount could be organized from the internal sources. For example, to implement the Jatrabari-Gulistan flyover, an investment of around 1,400 crore would be required, which is being organized from our internal sources.
Bangladesh takes credit from various sources including the WB and the ADB. So, there is no harm to take loan from India, which is our close neighbor and both Bangladesh and India are linked in many ways including culture and economy. Despite that, controversy or the debate has been developed over the Indian credit line. The opposition BNP and its allies have demanded scrapping of the loan deal which they say goes against the national interests.
The ruling circle and its allies, especially a section of the media upholding Indian causes in Bangladesh, have started lauding the deal and lavishing it with elaborate praise.
There is reason for the debate developing over the Indian credit line because it bears both political and economic significance. Through this deal the ground breaking of the much talked-about transit or corridor has taken place. A good number of projects that would be financed from the credit line facilitate transit or corridor to India, establishing easy commercial and other links with the landlocked Seven Sister north-east Indian states. Indian economy and business would derive more dividends from this credit line compared to Bangladesh's business and economy. The 20-year tied credit line could be used as an instrument of pressure in the future against Bangladesh who may not be as friendly to Delhi as the present regime of the country.
Like the political circles, quarters among the civil society are divided over the issue. Former caretaker government Adviser and former Chairman Regulatory Reforms Commission termed the credit line as 'Indian biased' because Bangladesh would have to buy Indian products and services without having any international competition, which might compromise both price and quality. Dr. Akbar Ali Khan also said that some of projects that would be financed from this credit line would not bear any benefit to Bangladesh, rather would be providing transit or corridor to India.
On the other hand former ESCAP executive Rahmatullah who is know as an upholder of the Indian causes in Bangladesh said that the projects dedicated to facilitate transit to India would have immense benefit for Bangladesh's economy. He, however, could not reply whether infrastructure that would be developed facilitating transit or corridor would have enough traffic to maximize the economic benefit of Bangladesh.
Among the projects, five or six projects are not directly related with facilitating transit or corridor to the India. The remaining projects are directly or indirectly linked up with the transit or connectivity facilities.
As sovereign nation Bangladesh would take loan from any source for serving its economy. But this is the first time in the history of Bangladesh; credit has been taken for serving the direct interest of our neighbor India.
In the past while raising the transit or corridor demand, the Indian side hinted that cost of infrastructure that would be required for facilitating transit or corridor would be borne by them. But now it seems the entire infrastructure cost for facilitating the transit or corridor to India will be borne by Bangladesh. The question is, whose interest is Bangladesh government serving?
The nature of the Indian credit line deprives Bangladesh from international competition for procuring railway engines, coaches, wagon etc. and construction services. This is likely to deprive Bangladesh of the best price and best quality of service.
The price of Indian products and Indian construction services would be virtually determined by them and Bangladesh would have to accept the same. Indian constructors would be employed for implementation of the different infrastructure projects including the development of the container port at Ashuganj, construction of two railway bridges, overpass, flyover and road networks. Bangladesh would be deprived of the best construction services in the absence of the international competition. Experience indicates that the Indian firms would protect their national interests while providing services to Bangladesh.
Very recently an Indian firm, Simplex International Ltd, was given the job for construction of the Jatrabari-Gulistan Flyover by the Orion Group. For construction purposes of the flyover, around 100 thousand cubic meters of hard rock would be required. The Indian company decided to import that same from India despite the fact that good quality hard rock is available at Bangladesh's Maddhypara Hard Rock Mine.
The fact is that India has offered the US$1 billion credit for marketing its products and services in Bangladesh.
Bangladesh is likely to face huge losses
Dr Akbar Ali Khan raised a pertinent question of rate of return from the infrastructure that would be developed from the Indian credit. According to him the per capita income of the Indian landlocked states is very low and demand of goods and services are also low. Under these circumstances, would it be possible to have good economic returns from the infrastructure? If not, then Bangladesh will have to incur huge losses, which might cripple the repayment capacity. Despite the various hardships, Bangladesh has never failed to address its international obligations and commitments.
Credit of be used to facilitate Indian power business
An amount of US$150 million from the US$1 billion credit would be used for development of 100-kilometer long power interconnection facilitating the Indian power business with Bangladesh. Earlier, the two sides signed an agreement regarding bulk power business. India would export 500-mw electricity to Bangladesh to augment the quantum of power supply. A long 142 kilometer power inter connection would have to be developed to translate the power business in reality. Out of 142 kilometers, 42 kilometers fall within Bangladesh territory and 100-kilometer fall within Indian territory. It was thought that the Power Grid Company of Bangladesh would responsible for the development of the inter connection within Bangladesh territory and the interconnection within Indian Territory would be developed by the respective Indian Agency.
While signing the power agreement, it was not mentioned how the expenditure of the interconnection would be met. It was thought that the respective governments would bear the interconnection costs. Accordingly, the Power Grid Company of Bangladesh made credit line with ADB for development of 42-kilometer long interconnection within its domain.
After inking the Indian credit deal, it was found out that that the cost of the Indian interconnection facilitating the Indian power business with Bangladesh would have to be borne by Bangladesh. The Indian Agency would spend Bangladesh money and Bangladesh agency would have nothing to say.
What has Bangladesh gained?
After the election victory of the grand alliance in the last general election, India has taken systematic moves to address all of its concerns, which include security and transit. Bangladesh responded positively. First there was the crack down on the fugitive ULFA leaders who were caught and handed over to India. Now the transit issue is going to be resolved through the utilization of the Indian credit line. But in exchange what has Bangladesh gained?
Bangladesh's main concern is the sharing of water of all common rivers with special emphasis on the sharing of Teesta waters. Except promises, nothing could be attained in this field. During the brief visit, Indian Finance Minister Pranab Mukherjee could not say definitely when the Teesta water sharing would take place. He simply reiterated the earlier promise that the Indian is considering water sharing of the Teesta River.
Bangladesh could not stop border killings by the Indian Border Security Forces (BSF). So far, one-sided goodwill and friendship has been developed between Dhaka and Delhi with the odds weighing heavily in Delhi's favour.
Projects to be financed from the Indian credit line
- A total of 14 following projects would be finance from the Indian US$1 billion credit:
- Procurement of six high-powered dredgers at cost of US71.69 million. One of the dredgers would be used for dredging at Mongla Port, which is one of the destination facilitating transits to the India
- onstruction of an internal container river port at Ashuganj at cost of 36.23 million. The Ashuganj Container River Port would mainly used by India for transportation goods through container to the Assam and Tripura. Recently Bangladesh and India have declared both the Ashuganj and the Silghat as the port of call
- Procurement of 10 broad gauge locomotive engines from the India at cost of $31.55 million
- 125 broad gauge passenger coaches will be procured from India at a cost of US$53 million
- 60 tank wagons for transportation of petroleum products would be procured at cost of US$8.85 million
- Procurement of 50 meter gauge flat wagons and five break vans at cost of US$4.55 million
- Construction of 2nd Bhairab Bridge and 2nd Titas Bridge at a cost of US$120 million
- Procurement of 300 double-decker buses for Bangladesh Road Transport Corporation at cost of US$29.65 million
- Procurement of 50 articulated buses for Bangladesh Road Transport Corporation at cost of US$6.12 million
- Construction of road network for a land port. Under the project, Sarail-Brahmanbaria-Sultanpur-Akhaura-Senarbadi Road would be constructed at cost of US$33.82 million
- Construction of an overpass at Jurain rail crossing and a flyover at Malibagh rail crossing at cost of 31.44 million
- Construction of road between Ramgarh and Sabroom (Indian state Tripura's southern boarder) at a cost of US$14.53 million
- Construction of power grid line between India and Bangladesh. Under the project a 400KV grid interconnection between Bheramara of Bangladesh and Bharampur of India at cost of US$150 million
- Capacity building of Bangladesh Standard and Testing Institute at cost of 8.92 million
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