Energy Bangla

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Dhaka Friday,  Mar 29, 2024

BD To Be Solo Loan-Guarantor For Rampal PP!

EB Report

Rampal, the most arguable coal-fired power plant is a Joint-Venture
(JV) project of Bangladesh and India where, both of the partner
countries have an equal 50 percent ownership over the JV Company named
Bangladesh India Friendship Power Company Limited (BIFPCL). Indian
Exim Bank is about to finance 60 percent (160 crore USD) of the total
cost of this project. The credit deal with the Indian bank is soon to
be signed, but surprisingly the bank demanded Bangladesh to be the
sole guarantor of the credit deal.

The total project cost of materializing the power plant is estimated
as 20 crore USD, among which, 70 percent will be collected from bank
loan. Bangladesh Power Development Board (BPDB) and Indian National
Thermal Power Company (NTPC) have uniformly 50 percent ownership in
BIFPCL and will invest 15 percent severally of the total estimated
cost. In a situation like this the Indian Exim bank has given a
condition to the government to be the sole guarantor against the bank
loan of $1.6 billion.

It means, the liability of the loan repayment will be on the shoulders
of Bangladesh if BIFPCL fails to repay the loan or the project ever
stumbles. BIFPCL managing director Ujjal Kanti Bhattacharjee has sent
a letter recently to the Power division secretary informing about the
conditions that the Exim Bank demanded. According to the sources from
Power division, BIFPCL is likely to sign the credit deal in the
October this year. Rather sharing the liability of the bank loan, the
Indian authority seemed to have more interest counting 50 percent
profit of the project under tax-free advantage only.

Addressing this issue, Prof. Anu Muhhammad, the member secretary of
the National Committee to Protect Oil, Gas, Mineral Resources, Power
and Ports said that, Rampal was already a proven self-destructive
project and now Exim bank made the situation worse. The conditions
that Exim bank demanded, if agreed, Bangladesh will take all the
liabilities of the loan and repay the loan solely if the project shuts
down or fails to gain profit. On the other hand, PDB’s counter partner
Indian NTPC will take the 50 percent of the total profit, not taking
any liabilities of the bank loan. This condition clears that the
project of Rampal has been a lop-sided power plant project in the
favor of Indians and the profit greedy businessmen’s, claimed Anu
Muhammad.

Once the credit deal with Exim bank is signed, the $1.6 billion loan
has to be repaid within 20 years and the installment of repay will
start after 7 years from the deal signing. The interest rate of the
loan is LIBOR (London Interbank Offered Rate) plus 1 percent, while as
of June, 2016 the current LIBOR rate is 0.93 percent.

Morever, BIFPCL have to pay 2 lack USD as the consultation fee of the
loan processing. Another 0.5 percent interest will be applied on the
unredeemed amount of the loan on a yearly basis.

However, Ujjal Kanti Bhattacharjee also addressed and supported the
bank’s demand issue saying, the project was taken for the sake of
Bangladesh’s development. Bangladesh will use the generated electric
power and as a result Bangladesh should take the liability of the
loan.

Ahsan H Manjur, the executive director of Policy Research Institute
(PRI) seemed to have a different view than that of Ujjal Kanti’s.
Since, both the countries have equally 50 percent ownership in the
company, then the liability should be shared proportionally among the
partners. If Bangladesh takes the whole liability the deal will be
one-sided losing its equipoise, he remarked. He suggested to have more
control over the BIFPCL, as the bilateral company is operating in our
home ground.

Green and Environmental activists have been demanding for scraping the
Rampal project or at least re-allocating the project site as its only
14 km away from the Sundarbans, the world heritage site.

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