Manual for Development Projects - Planning Commission

Chapter-7
ministries/ organizations/departments responsible for implementation of projects should, in the initial
stage, take a decision about the goods/equipment/machinery which are locally available or can locally be
manufactured/fabricated.
vi) Foreign Procurement / Utilization of Foreign Aid
(a) In certain cases, the Loans/Assistance from the Donor Agencies are tied, which means that the
machinery/ equipment have to be procured from the firms of the individual country or from the firms of
the member countries of the donors club. The selection of appropriate materials/ machinery/equipment
and framing of specifications, however, has to be carried out as per requirement of the project.
(b) The foreign assistance is not timely utilized in certain cases due to various reasons and accordingly
the development of the country suffers. The following are considered as the main causes of slow
utilization of foreign assistance:
i) There is a growing tendency on the part of aid-utilizing agencies and depart-ments to come up with
highly inflated figures of project aid requirement especially against fresh aid. The past trend indicates that
hardly 3-5 per cent of project aid gets disbursed in the year of commitment as there is always a time-lag
between pledges and commitments. Even this magnitude of disbursement takes the form of downpayment,
consultancy fees and payments for other services rendered. Generally no imports of equipment
and machinery are involved.
ii) Delay by the sponsoring Ministries/ Organizations to obtain approval in respect of the project by the
Competent Authority i.e. CDWP/ECNEC etc.
iii) Procedural delays by the aid-utilizing agencies which result in delays in the procurement of materials
required for the projects.
iv) Delay sometimes takes place because the conditions for effectiveness of the loan are not fulfilled in
time to enable disbursement of the loan.
v) Delays in appointment of the consultants.
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vi) Tendency of the executing agencies to go by the terminal dates of opening L/Cs and disbursements
resulting in frequent requests for extension of these dates.
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9/23/2010