‘Costly’ WB loan likely for power project | 2018-02-21 | daily-sun.com

‘Costly’ WB loan likely for power project

Hasibul Aman     21 February, 2018 12:00 AM printer

‘Costly’ WB loan likely 
for power project

The government is going to take Tk 3,642.38 crore costly loan from the World Bank for implementing a large project to strengthen eastern power grid network. 

The loan will be taken from WB’s Scale-Up Facility (SUF) credit for ‘expansion and strengthening of eastern grid network’ project proposed to be implemented at a total cost of Tk 5,804 crore, official sources said. 

The non-concessional SUF loan from IDA may bear 3 to 5 interest whereas usual IDA loans bear 0.75 percent service charge, sources at Economic Relations Division (ERD) said.

The scheme is expected to be tabled at the upcoming Ecnec meeting for final approval, the Planning Commission sources said.

Both the parties have agreed on the loan as the Economic Relations Division (ERD) has completed a loan negotiation with the Washington-based lender in this connection, the ERD officials said.

 “Many people are not getting electricity despite a major improvement in power generation because of weakness in transmission line. So the project is very important,” commented a high power official.

He, however, said there is nothing to be worried about the loan as the scope of concessional loans are getting narrower day by day.

Besides, a number of terms and conditions, including consultancy, are tagged with low-cost loans, which actually hampers project implementations.

In view of this, the new type of loan won’t have this problem as it won’t have such terms and conditions.

The ERD has informed the WB of the consent of power division and the project’s implementing agency Power Grid Company of Bangladesh Ltd (PGCB) about taking the loan, ERD sources said.

Finance Minister AMA Muhith early in December gave a nod to a proposal outlining suitable options for getting the SUF credits, official sources said.

Later, the government finalised the loan modalities such as receiving it as fixed spread-based credit with floating interest rate in Euro currency, sources added.

A preparation mission of the WB visited Dhaka between April 24 and 30 last year and a technical mission came to the capital during October 23 to 30. And the ERD completed the loan negation on Janury 3 this year.

The loan signing process will start after the sheme gets the Ecnec clearance, sources informed.  

The project will be implemented in Chittagong, Cox’s Bazar, Brahmanbaria, Feni, Munsiganj, Noakhali, Comilla, Chandpur and Laxmipur districts.  

In addition to the WB loan, the government will bear Tk 1,683.38 crore from its own resources, while PGCB will provide 478 crore.

The IDA18 Scale-Up Facility is designed to scale up IDA financing for country-specific and regional operations during the IDA18 period - July 1, 2017 to June 30, 2020.

The facility makes available up to $6.2 billion to IDA countries on non-concessional (IBRD) lending terms. These resources are in addition to the regular concessional resources that countries will receive in IDA18.

The government first signed an SUF credit deal with the WB in August last year for Bangladesh Power System Reliability and Efficiency Improvement project last year.

Interest rate for this loan was 2.85 percent. Besides, 0.25 percent yearly commitment fees on undisbursed amount and another 0.25 percent front end fees (one time) will have to be paid.  The loan will have to be repaid in 30 years including nine years grace period.

In line with its power generation master plan, the government wants to set up a transmission line with a capacity to handle pressure of 40,000MW electricity by 2030.

Under the scheme, 12.63km 400KV, 175.91km 230KV, 256.3km 132KV transmission lines will be constructed alongside installing two 400KV sub-stations, two 230KV sus-stations, 10 132KV sub-stations and acquiring 86 acres of land.