Universal Eligibility for World Bank Loan

• 21 Sep 2020

Why in News

Recently, the World Bank has clarified that the USD 1 billion loan that it has provided to India in May 2020 to deal with Covid-19 comes with a condition of universal eligibility in procurements.

Key Points

• Clarification:
  
  • The World Bank would have the right to review the procurement documents, inspect all accounts, records and other files relating to the project. Compliance to these conditions has been made mandatory for the funding.
  • Following the clarification the Indian Government has also asked all its production units and other major establishments to remove preferential references in tenders and ensure that contractors explicitly agreed to comply with the relevant provisions of the World Bank’s guidelines.
• Impact:
  
  • This would mean that all preferential market access policies, shall not be applicable on purchases made while implementing the national project.
    
    • The preferential market access policies includes Public Procurement (Preference to Make in India) Order, Micro Small & Medium Enterprises (MSME) Policy, certain benefits to start-ups.
  • it will be a setback to the Make in India and Atmanirbhar initiative.
• Background:
  
  • The World Bank has announced a loan in May 2020 to prevent, detect and respond to the threat of coronavirus and strengthen national health systems.
  • It is pivoted towards migrants, unorganised workers, informal sector, and creating an integration of the existing infrastructure of safety nets like the Public distribution system, Jan Dhan, Aadhar & Mobile (JAM trinity).
  • This loan will be funded and operated in two phases:
    
    • First Phase: An immediate allocation of USD 750 million for fiscal year 2020.
      
      • It will be implemented countrywide through the Pradhan Mantri Garib Kalyan Yojana (PMGKY) to benefit vulnerable groups, particularly migrants and informal workers.
    • Second phase: A USD 250 million second tranche that will be made available for fiscal year 2021.
      
      • It would deepen the social protection package, whereby additional cash and in-kind benefits based on local needs will be extended through state governments and portable social protection delivery systems.

World Bank Group

• With 189 member countries, the World Bank Group is a unique global partnership which consists of five development institutions.
• International Bank for Reconstruction and Development (IBRD) provides loans, credits, and grants.
• International Development Association (IDA) provides low- or no-interest loans to low-income countries.
• The International Finance Corporation (IFC) provides investment, advice, and asset management to companies and governments.
• The Multilateral Guarantee Agency (MIGA) insures lenders and investors against political risk such as war.
• The International Centre for the Settlement of Investment Disputes (ICSID) settles investment-disputes between investors and countries.
  
  • India is not a member of ICSID.

Source: TH