Modi government approves IDEAS scheme to streamline LOC to make Indian funding attractive

The countries have been raising the delay factor with India in various bilateral meetings or in meetings on the sidelines of multilateral meets.

Modi government approves IDEAS scheme to streamline LOC to make Indian funding attractive
NEW DELHI: With an eye on making Indian funding attractive amid massive Chinese funded projects in the developing world, the Modi government has approved the new Indian Development Assistance Scheme (IDEAS) to streamline Lines Of Credit (LOC) offered to various countries in South Asia, SE Asia, Africa and Central America emphasizing on timely completion of projects.

Timely completion of projects under Line Of Credit scheme and other assistance programs across countries have been key complaint of the recipient countries. Several factors including delay in release of funds to audit system for projects abroad based on Indian rules contribute to projects missing deadlines. The recipient countries have been raising the delay factor with India in various bilateral meetings or in meetings on the sidelines of multilateral meets.

However, hoping to reverse this trend the Modi government has updated the IDEAS scheme this month. The initiative includes provisions to provide better terms of credit, which will be attractive to many developing countries, who are now seeking alternative means of finance, according to MoS (External Affairs) V K Singh.

In a reply to Lok Sabha last week on the progress of various LoC funded projects, Singh informed that several changes have been made in the operational guidelines such as making Detailed Project Report, strengthening of monitoring system, pre-qualification of competent companies and requirement of regular reports by the borrowing governments. Additionally, regular monitoring is also being carried out by borrowing governments, Project Management Consultants, implementing agency and Indian Missions abroad to ensure projects are executed in a timely manner, according to the Minister. “These changes should improve the implementation of projects undertaken through these LOCs,” hoped Singh.

While India with a benign image enjoys tremendous goodwill across continents as it neither impose projects nor is prescriptive in its approach, pace of project implementation has been Achilles Hill for various reasons including delay in meeting deadlines even for projects given as grants, a source who did not wish to be identified said.

But the Modi government, with India’s limited resources, hopes to correct its record amid China’s growing commitments to aid developing countries. China has been raising its overseas aid and investment in developing nations in recent years with an eye on playing larger role in global politics. The state-run Export-Import Bank of China and China Development Bank have increased the country’s presence in developing countries by financing large projects, some of them to be repaid in oil, minerals and other natural resources. However, some critics point out that China has not provided fewer grants, interest-free loans and concessional lending unlike India and this has given rise to tensions in parts of Africa and even Sri Lanka is worried over the interest rates for the Chinese projects sanctioned under Rajapaksa regime.

At the last Africa Summit in Delhi Narendra Modi announced $ 10 bn LOC for African countries over and above ongoing LOC for the continent. India’s track record for LOC projects in Bangladesh and Sri Lanka has been up to the mark.

The Line of Credit (LOC) is a financing mechanism through which India’s Exim (Export-Import) Bank extends support for export of projects, equipment, goods and services from India. Exim Bank extends LOCs on its own and also at the behest and with the support of Government of India. Between 2008-15 Exim Bank has disbursed $ 11,678 million as LOCs for various development related and capacity building projects across continents.

Over a decade back in 2003-04, the then Vajpayee government formulated the Indian Development Initiative (IDI), now known as Indian Development and Economic Assistance Scheme (IDEAS) – with the objective of sharing India’s development experience through (a) capacity building and skills transfer, (b) trade, and (c) infrastructure development, by extending concessional Lines of Credit (LOCs) routed through Exim Bank, to developing partner countries, towards creating socio-economic benefits in the partner country.

India's development partnership is based on the needs identified by the partner countries and the effort of the Ministry is geared towards accommodating as many of the requests received from partner countries as is technically and financially possible, pointed out an official familiar with the developments In 2012 The Ministry of External Affairs (MEA) created the Development Partnership Administration (DPA) Division to deal with India’s development assistance programmes abroad, including LoCs routed through Exim Bank. These LOCs are now increasingly being extended to partner countries for large-scale and complex projects (project exports from India). However, even as MEA identifies projects in the recipient countries the aligned Ministries are not always able to keep pace to conclude the projects.
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