Rampal: Sovereign guarantee approved for Indian Exim Bank’s

The Finance Ministry has finally provided the "sovereign guarantee" for a $1.6 billion loan from India's Exim Bank towards implementing the 1320 MW coal-fired Rampal power plant near the Sundarbans.

"We received sovereign guarantee clearance from the Finance Ministry on Sunday and accordingly communicated it to the Bangladesh-India Friendship Power Company Limited (BIFPCL)," ATM Mostafa Kamal, joint secretary at the Power Division, told UNB on Monday.

A sovereign guarantee is a government guarantee that an obligation will be satisfied in case the primary obligor defaults - that is, in this case the government of Bangladesh will guarantee the repayment of the loan to Exim Bank of India.
BIFPCL is a joint venture company with 50:50 equity held by Bangladesh and India and formed for the special purpose of implementing Rampal power plant.

State-owned Power Development Board (PDB) represents Dhaka in the company while Indian NTPC represents New Delhi in the JV.

Earlier, the government's top-level committee on non-concessional loans, headed by Finance Minister AMA Muhith, approved the loan proposal in a meeting on September 15 last year.

But the implementation of the project was getting delayed as the Indian Exim Bank was imposing different conditions which were unacceptable to Bangladesh, said the officials.

After long negotiations, both side reached to a understanding and a draft agreement was sent to the Law Ministry for vetting. The Law Ministry sent back the file in the last week of March.

"Actually the Finance Ministry's clearance came as a follow-up of the Law Ministry's vetting," said the official.

Official sources said both the Power Division and the BIFPCL preferred Indian Law in case of dispute resolution in implementation and operation of the project with Exim Bank's credit. But finally, the Law Ministry fixed Welsh Law for dispute resolution.

Power Division officials said that the Exim Bank and the BIFPCL were supposed to sign a deal in this regard during the Prime Minister's New Delhi visit.

"But we are not confirmed as yet whether the deal was signed or not. Things will be known once the list of the deals will be published," said another Power Division official.

He also said the BIFPCL has a plan to start the physical work of the power project within 28 days of signing the credit deal.

UNB/QH