The Awami League’s autocratic regime came to an end on August 5 after Sheikh Hasina resigned from her post as prime minister and fled to India in the face of a mass uprising led by students and supported by all walks of people, leading to a halt in almost all bilateral projects between Bangladesh and India.
Workers involved in these projects have also left the country, raising doubts about the future of various planned initiatives.
Tensions between Dhaka and New Delhi have emerged since Hasina sought refuge in India. Trust between the two nations has further eroded, particularly after India released water from the Dumboor Dam without prior warning, triggering one of the most severe floods Bangladesh has experienced in recent years.
India, which had heavily relied on its relationship with the Awami League, is now concerned about the future of its development projects in Bangladesh.
Specialists suggest that both governments are now facing a mutual lack of trust—India is reluctant to rely on Bangladesh’s interim government, led by Professor Muhammad Yunus, while Dhaka also has doubts about India's reliability. Until this trust is restored, the fate of bilateral development projects remains uncertain.
However, Finance and Commerce Adviser Dr Salehuddin Ahmed stressed the importance of ongoing projects under India's lines of credit (LoCs), describing them as large-scale, critical ventures that will proceed as planned. He also noted that additional projects may still be undertaken, considering the mutual interests of both nations.
Project delays and uncertainty
In the last 13 years, Bangladesh has undertaken 40 projects under three Indian LoCs. Of these, 15 have been completed and eight are still ongoing, but there are increasing concerns about delays in funding for the remaining projects. The future of 17 others, which are still in the planning phase, is now in doubt.
Reports indicate that Bangladesh owes more than $1 billion to five Indian power companies. Adani Power alone was owed $800 million as of June 30, 2024. The company exports all its electricity from its thermal power plant in Godda, Jharkhand, to Bangladesh, further complicating the financial situation.
In addition to Adani Power, companies such as SEIL Energy, PTC India Limited, NTPC (including DVC and Tripura), and Power Grid Corporation of India Limited also have substantial outstanding payments from Bangladesh, amounting to millions of dollars. India anticipates that Bangladesh's political instability may further disrupt repayments.
With Sheikh Hasina, India’s preferred leader, no longer in power, concerns are growing that Indian interests may not be prioritised as they once were.
Meanwhile, Indian Ministry of External Affairs Spokesperson Randhir Jaiswal confirmed in a regular briefing that almost all bilateral projects between the two countries have been suspended since August 5. Many workers have returned to India and Jaiswal warned that these projects are unlikely to resume unless stability is restored.
Key infrastructure projects
India has abruptly halted plans to extend a cross-border diesel pipeline further into Bangladesh, citing the ongoing political crisis in Dhaka. The India-Bangladesh Friendship Pipeline (IBFP), which began supplying diesel to Bangladesh in March 2023, was initially intended to extend its 131-kilometre stretch from Dinajpur’s Parbatipur to Natore.
However, the Indian government has now paused the expansion, leaving the pipeline’s terminus at Parbatipur for the time being.
The future of several other key projects, including the Maitree Super Thermal Power Project in Rampal, Bagerhat, and the Numaligarh-Parbatipur Oil Pipeline, is also uncertain.
Among other stalled initiatives are the construction of the third and fourth dual gauge tracks between Dhaka and Tongi and the Kulaura-Shahbazpur Railway Reconstruction Project, both of which have faced delays for over a decade.
Additionally, concerns are mounting about the delay in upgrading the power supply system for the Rooppur Nuclear Power Plant (RNPP), building hi-tech parks in 12 districts, expanding the road from Ashuganj river port to Akhaura land port into a four-lane highway, and developing the 400 kV transmission line from Barapukuria to Bogura and Kaliakoir.
Challenges in Indian loan-funded projects
Agencies involved in these projects report that Indian loan-funded projects often face complications. A common issue is the frequent use of subcontractors who lack the necessary expertise, resulting in delays.
Furthermore, if a project requires revisions, India is often reluctant to cover the additional costs, and the Export-Import Bank of India (EXIM Bank) repeatedly asks for justifications for the increased expenses. These challenges have led some implementing agencies to be less enthusiastic about working with Indian loans.
Stalled progress on Indian LoC projects
Under the first LoC, 15 projects were initiated, 11 of which were fully completed. One project was declared finished despite partial completion. Three railway projects, which have been ongoing for nearly a decade, are progressing slowly. While one is nearing completion, the timeline for the other two remains unclear, leaving those involved uncertain about their finalisation.
Under the second LoC, 15 projects were initially approved, but three were later dropped. Two of the remaining projects have been completed, and ten are in various stages of implementation. Under the third LoC, two projects for the procurement of buses and trucks have been completed, while 15 others are progressing at different levels. Proposals have been made to drop four of these projects.
Bangladesh first signed a loan agreement with India in August 2010, initiating the first LoC worth $860 million. This was followed by a $2 billion LoC in 2016 and a $4.5 billion LoC in 2017. Altogether, India has committed $7.36 billion in loans to Bangladesh, with the funds provided by the EXIM Bank of India. The loans carry a 1 per cent interest rate, with a 15-year repayment term and a five-year grace period.
Indian loan flow slowed
According to the Economic Relations Division (ERD) sources, by June 2024, around $1.75 billion had been disbursed under the LoCs, while $5.61 billion remained in the pipeline. Before the fall of Sheikh Hasina’s regime, 17 projects under the LoCs were in the process of hiring consultants, contractors, or preparing proposals. These activities have now been suspended, and loan disbursements for the eight ongoing projects have also been halted, casting doubt over their future.
In the fiscal year 2023-24, only $298 million was disbursed from Indian loans, a drop of nearly 12 per cent compared to the $371 million disbursed in the previous fiscal year. In the fiscal year 2021-22, $327.8 million was disbursed, while $140 million was released in both 2020-21 and 2019-20.
ERD officials said that Indian loan disbursements are slower compared to other development partners. One major factor is the condition that 75 per cent of procurement for Indian loan-funded projects must come from India, with 65 per cent of construction materials sourced specifically from Indian suppliers. Moreover, at least 10 per cent of procurement must be local to Bangladesh. Transporting construction materials like sand and cement from India adds further logistical challenges.
India reaffirms commitment
Indian High Commissioner to Bangladesh Pranay Verma last Tuesday reassured reporters that ongoing Indian-funded projects in Bangladesh would continue. He stated that cooperation between Dhaka and New Delhi remains strong, and no projects have been suspended. Although some contractors returned to India, Verma expects them to resume work shortly.
After a meeting with the Indian envoy, Finance and Commerce Adviser Dr Salehuddin Ahmed reiterated that India views Bangladesh as a promising destination for investment and economic cooperation.
"India has assured Bangladesh of its continued support," he added.
