Financial Daily from THE HINDU group of publications
Friday, May 30, 2003
Exports & Imports
Government - Foreign Relations
India may open talks with Iraq to collect old dues
MUMBAI, May 29
THE Government is expected to begin talks with Iraq to recover about $1.7 billion (of which about $800 million is yet to be unacknowledged as debt by Iraq) billed to that country by Indian project exporters about two decades ago, as soon as the administration there starts functioning fully.
According to industry sources, of the $1.7 billion, about $900 million ($500 million plus piled up interest of about $400 million) is certified as owed to India but the rest of the money is not yet recognised as receivables. Companies that were operating in Iraq estimate that the uncertified amount comprises about $400 million owed for completed work, mainly construction, and another $400 million as war compensation.
There were about 35 Indian companies, most of them engineering and construction contractors and project exporters that were operating in the war-torn desert nation.
In February this year, the Indian Government settled Rs 298 crore of receivables of three companies - Jaiprakash Industries, Som Datt Builders and Rail India Technical and Economic Services (RITES), an Indian Railways subsidiary. The Government issued seven-year bonds carrying 6 per cent interest to these companies for the receivables from Iraq, the sources said.
Amounts owed by Iraq to Indian companies are routed through the Central Government under a `deferred payment arrangement' (DPA) put in place in 1983 during the Iran-Iraq war.
Under the mechanism, the Central Bank of Iraq certifies the amounts as receivables by Indian companies and settles bilaterally with the Indian Government, sometimes bartering the debt for oil.
The Indian Government, in turn, issues bonds to the companies to whom the money is owed.
The latest issue of bonds was a third instalment after 1995 when the Government issued seven-year, 12.08 per cent bonds and 1998, when it gave seven-year 11.4 per cent bonds.
From 1983 to 1990, even though about $1.2 billion was owed to Indian firms, only $701 million was received. The rest $500 million and interest add up to nearly $900 million.
In 1991, the Centre set up a task force on project exports to Iraq, which laid down the modalities of settling the amounts. Under the arrangement worked out, the Central Bank of Iraq undertook to certify and settle payments to India through an account operated by the Exim Bank of India.
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