China is supposed to carry the cost of the construction which is 80 to 85 per cent of the total cost of the project. The main condition for China's financing is that open tenders cannot be called and Chinese contractors must get the job.
Govt Plea to Reduce Cost
'China set to pull out of two railway projects'
Published: 18 Jun 2021, 01:40
China is set to pull out of two railway projects as they were told to reduce the project expenditure. They said they would not finance the construction of a dual gauge double line from Joydebpur in Gazipur to Ishwardi in Pabna.
The Chinese contractor has stated that it would not work on the project of converting the metre gauge line to dual line from Akhaura to Sylhet.
Apart from this, an agreement has been reached with the Chinese contractor for the construction of a dual gauge double line from Joydebpur to Jamalpur via Mymensingh. Sources said that the future of the project has become uncertain under the existing circumstances.
These three projects were approved under G2G agreement with China. Chinese contractors were appointed for the implementation of these projects. Their government will provide loans for these projects.
But an investigation by the Prime Minister's Office revealed that the project cost was estimated very high. Therefore, prime minister Sheikh Hasina directed to reduce expenditure by Tk 46.5 billion (4,650 crore) on two projects worth Tk 303.25 billion (30,325 crore).
The railway ministry also formed an expenditure rationalisation committee and proposed to reduce the project expenditure. China then announced that it was withdrawing from financing a project. During Chinese president Xi Jinping’s visit to Bangladesh in 2016, it was agreed that China would finance these projects.
On 15 September last year, Prothom Alo published a report on the G2G projects with China titled “Development on high interest loans, luxurious expenditure in project”. On 30 September a probe committee was formed by the Prime Minister’s Office. The committee submitted the report by mid-October.
After the submission, prime minister Sheikh Hasina directed to reduce the project expenditure. At the same time, she directed to take necessary steps including amendments in compliance with the law by analysing the observations and recommendations of the probe committee. A letter regarding this was sent to the railway ministry on 5 November.
Apart from this, the construction project of Joydebpur-Mymensingh-Jamalpur mixed gauge double line is also being done under G2G agreement. The estimated cost of this project is Tk 115.57 billion. For this, a settlement of Tk 80 billion was signed with a Chinese contractor for the construction of the main structure. This project is yet to get the official approval of the government. The prime minister's directive also mentioned to rationalise the cost of this project too.
According to the railway sources, the processes involve the assessment of the cost of these three projects, conditions of appointing contractors and finance are the same.
When asked about this, railway minister Nurul Islam told Prothom Alo, “We are reissuing letters to China for the Joydebpur-Ishwardi and Akhaura-Sylhet projects. We will take necessary initiatives once we get a reply from them. The future of the Joydebpur-Jamalpur project is also relying on these projects.
Bangladesh is supposed to bear the local expenditures including land acquisition, rehabilitation and salary allowances. And China is supposed to carry the cost of the construction which is 80 to 85 per cent of the total cost of the project. The main condition for China's financing is that open tenders cannot be called and Chinese contractors must get the job.
At least three officials of the railway told Prothom Alo that the cost of uncontested projects is usually high. At the moment, only the project of constructing railway tracks at the both sides of the Padma bridge is going on under G2G agreement with China. The estimated cost of this project is Tk 392.47 billion. There are allegations of extra expenditure in this project too.
Joydebpur-Ishwardi dual gauge double line
The China Civil Engineering Construction Corporation (CCECC) is the contractor of the project. A cost of about Tk 610 million (61 crore) was estimated to construct per kilometre of railway tracks.
Construction of similar railway tracks is underway in Akhaura–Laksam route spending Tk 190 million (19 crore) a kilometre of tracks. Contractor of this project was appointed through competitive bidding.
According to railway sources, the expenditure of the Joydebpur-Ishwardi project was fixed with price of the project equipment estimated to be increased by 25 per cent a year.
Instructed by the prime minister, the rationalisation committee proposed it at 10 per cent, reducing the project cost by Tk 10.85 billion (1,085 crore). A cost of Tk 800 was fixed to fill a cubic meter of soil. Yet, it was Tk 250-400 in other projects of the railway.
The rationalisation committee proposed to decrease Tk 1.43 billon (143 crore) in land filling, Tk 1.27 billon (127 crore) in installing railway tracks, Tk 1.50 billon (150 crore) in constructing bridge and culvert plus a five per cent reduction on the estimated cost to build the station building.
The expenditure decreased by Tk 14.95 billion (1,495 billon) – a 12.91 per cent of the total project cost. The project expenditure was estimated at Tk 142.51 billion. The Chinese contractor is fixed at Tk 115.87 billion (11,587 crore) for constructing the main structure.
The railway authorities sent a letter to the Chinese government through Economic Relations Division on 17 January on the matter of cost reduction.
After that, China evaluated the project by an independent agency and informed that many portions of the project require high cost because adequate technical preparation and survey hadn’t been carried out.
If the project is implemented, revenue from goods transportation won’t be achieved as much as it was estimated. Hence, payment of debt will be in a big risk. So, the project didn’t pass the evaluation of the Chinese government.
Railway officials said in fact, China said that they are pulling out of the project. Then again, the CCECC on 24 February also said that they would not work in compliance with the reduction in the project expenditure.
Project director Golam Mostofa told Prothom Alo a letter will be sent to China requesting the latter to refinance. If the response is negative, alternative way will be considered then, he added.
Construction of Akhaura-Sylhet mixed gauge railway
The cost of the Akhaura-Sylhet mixed gauge railway construction project was estimated at Tk 161.04 billion (16,104 crore). A Chinese contractor was fixed at Tk 120.79 billion (12,079 crore) for the construction of main structure.
A proposal was also prepared to reduce Tk 33.54 billion (3,354.31 crore) from the cost of the contractor’s portion as per the prime minister's directives.
China approved the China Railway Construction Bridge Engineering Bureau Group Limited (CRBG) as the contractor of the project.
A cost of Tk 555.1 million (55.51 crore) was estimated to construct a kilometre of railway tracks. Yet, Tk 103.7 million (10.37 crore) was estimated to build a kilometre of similar tracks in Kulaura-Shahbajpur railway.
The expenditure rationalisation committee summited its report proposing to reduce the expenditure in similar manner. But the contractor didn’t agree. The Chinese government has approved credit to this project. However, uncertainty remains until signing the agreement.
On 26 August, foreign minister AK Abdul Momen wrote a letter regarding this project to prime minister Sheikh Hasina claiming the project expenditure is not high.
At that time, the expatriates' welfare and overseas employment minister Imran Ahmad and the environment, forest and climate change minister Shahab Uddin sent letter to the planning minister to expedite implementation of the project.
Regarding this, executive director of Transparency International Bangladesh (TIB) Iftekharuzzaman told Prothom Alo that it’s a good sign the Prime Minister's Office has found out the extra expenditure. However, it is the incapacity of the railway officials not to find out the extra cost during the bargain. There are examples of Chinese contractors enjoying privilege through illegal transaction around the world. This time whether such incident has happened should be scrutinised, he added.
He further said, “China might have some conditions since they finance the majority of the fund. However, an international standard should be maintained. China is a big economic and diplomatic partner of Bangladesh. That is why we expect China will not take any illogical stance on Bangladesh’s government reducing the project expenditure.”
This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Ashish Basu and Hasanul Banna.