KATHMANDU, Sept 21: Indian Line of Credit (LoC) of US$ 1,000 million has been downsized to $550 million because of the failure of the government to prepare projects to inject the fund.
Nepal and India revised the framework agreement for the soft loan, which was signed in November, 2014, during Prime Minister Pushpa Kamal Dahal's recently concluded India visit, according to Baikuntha Aryal, who heads the International Economic Coordination Division under the Ministry of Finance.
Nepal had managed to invest only $550 million of the $1,000 million LoC. The government has invested $330 million in 14 road projects, while $200 million has been allocated for two irrigation projects. The remaining $20 million will be for three transmission line components.
Government officials say the revision of framework agreement has relieved the government of the burden of the commitment fee (0.05 percent) of the unused $450 million.
Aryal, however, said Nepal will be able to make use of the $450 million once it identifies projects to inject the fund.
Addressing the Nepali parliament in August, 2014, Indian Prime Minister Narendra Modi had announced the soft loans to invest in infrastructure projects like roads, and hydropower and irrigation projects.
The remaining $450 million was meant for hydropower projects. But the amount remained used as the government did not have ready project.
Though there were discussions on utilizing the fund in Budhigandaki Hydropower Project (1200 MW), it couldn't materialize as the amount was less than a quarter of the project's estimated cost of Rs 250 billion (approximately US $ 2.4 billion).
India has expressed commitment for another assistance worth $1,000 million ($250 million in grants and $750 million in soft loan) for post-earthquake reconstruction works. Agreement for grants has already been signed. However, agreement on soft loan of $750 was signed during the PM Dahal's India visit.
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