A government committee on non-concessional loan is likely to approve tomorrow a Power Division proposal to take $132 million in buyers’ credit from two banks of China with high interest rate of around 4 per cent for setting up a 150-mega watt power plant.
The Economic Relations Division will place the Power Division’s proposal before the committee, headed by finance minister AMA Muhith, to take the loan from the Export Import Bank of China and Industrial and Commercial Bank of China.
A joint venture of state-run Bangladesh Power Development Board and Rural Power Company Limited, PDB-RPCL PowerGen Ltd, has already awarded a $156 million contract for installation of the dual-fuel power plant at Kodda in Gazipur to a Chinese joint venture M/S CCCE-ETERN-FEPEC.
Under the buyers’ credit system, the Chinese joint venture arranged $132 million in loan from the two China banks.
Sources in the ERD said that the terms of the Chinese buyers’ credit were much tougher than those of the loans the government took from the international lenders like Asian Development Bank, World Bank and Japan International Cooperation Agency for installation of power plants in the public sector.
The interest rate of the credit would be around 3.8 per cent as the rate has been set at 3.19 per cent plus six-month LIBOR (London interbank offered rate). The loan repayment period has been set at 12 years with two-year grace period.
‘On the other hand, loans from the international lenders and development partners carry interest rate between 0.01 per cent to 3.0 per cent against any borrowing with 22 to 40 years repayment period including 10-15 year grace period,’ said an ERD official.
He said that the standing committee on concessional loan, which was previously known as hard term loan committee, was likely to approve Chinese credit as the finance ministry earlier gave guarantee to the Power Division for the loan.
Power Division and ERD officials said an influential quarter in the ruling Awami League was active in pushing the government to take the high-interest credit for the power plant.
The officials said that the Power Division initially sought ERD’s nod for taking the loan but the ERD sent the issue to the loan committee as the loan was in hard term and the grant element of the loan was well below 35 per cent of the total loan.
‘In fact there was no grant element in the loan and the element stands at negative 3.82 per cent,’ said another official.
Power Division officials earlier claimed that they had gone for the costly Chinese credit because of fund shortage and aiming at brining more power plants into operation to mitigate power crisis.
ERD officials said the Chinese credit would be the third costly loans the present Awami League-led government would take for the power sector projects.
Earlier, the government took around $400 million from banks of Germany, Belgium and Spain for a 450MW power plant at Ashuganj and $201 million from a consortium of German and South Korean banks for another 225MW plant at Ashuganj at an interest of around 4 per cent.
-With New Age input
