Dhirasram ICD financiers finalised, construction to begin in 2024

After years of delays over funding issues, construction of the country's largest inland container depot (ICD) at Gazipur's Dhirasram is finally expected to start in 2024 as the government has finalised financiers for the project involving an estimated $774.56 million.

Of the amount, $250 million will come in the form of a loan from the Asian Development Bank (ADB) and the government will invest $416.15 million in the project while a private firm – which is yet to be selected – will inject the remaining $108 million to build the superstructure of the ICD.

Previously, the construction cost of the ICD – to be built on a 160-acre site near Dhirasram railway station in Joydevpur, Gazipur – was estimated at $300 million.

Once completed, the Dhirasram ICD with a 7.2-metre rail link will be able to handle 4,00,000 TEUs (twenty-foot equivalent units) of containers a year, bringing about massive changes in freight train transportation, said railway sources.

Once the Dhirasram ICD is built, the Kamalapur ICD in the heart of Dhaka city will be shifted there.

The ADB confirmed funding for developing a substructure in the ICD project of Bangladesh Railway in October last, in response to a Railway proposal.

Infographic: TBS

Railway officials told The Business Standard that in view of the need for high-quality logistics facilities and efficient operation, the Bangladesh Railway and the ADB have agreed that the project should have a PPP component for ICD operation and maintenance.

Specifically, while the substructure of the ICD will be constructed with a sovereign loan from the ADB, the procurement of equipment and construction of the superstructure will be funded by a PPP concessionaire who will be selected through open competition and in accordance and be responsible for the ICD operation and maintenance. The rail link will be constructed with the government's own funds. 

Golam Mustafa, focal point for the Dhirasram ICD project, told TBS that a project to acquire land for the ICD is now in the process of getting approval from the Planning commission.

The construction of the ICD will start under the new development project in 2024 after the loan agreement is signed with the ADB, he said, the BR will float a tender to appoint a private firm in 2026 under the PPP model for the construction of the superstructure of the ICD.   

Why is the long delay?

In July 2013, the Cabinet Committee on Economic Affairs approved the project aimed at building a full-fledged ICD under PPP.

Finding no suitable private investor, Bangladesh Railway in August 2020 decided to construct Dhirasram ICD with government funds.

In December 2020, the ADB pledged $200 million in loans for the project and in January 2021, the Prime Minister's Office (PMO) decided to implement the project through ADB funding.

But two months later, the PMO changed its stance and decided to build the ICD in collaboration with Dubai-based logistics supplier DP World under the $1 billion investment proposal the firm had made at the beginning of 2020. The company wanted to invest the money in Bangladesh's container supply chain infrastructure, including ports, rail networks, and inland container terminals.

But, the authorities have had to shed the plan to make DP World a partner in the venture.

"The railway authorities held discussions with DP world for the construction of this ICD under PPP. Initially, the company showed interest in financing the project, but they lost the interest afterward," said Golam Mustafa.

SM Salimullah Bahar, chief planning officer of Bangladesh Railway, said the railway authorities have shed their plan to make DP World a partner in the Dhirasram ICD project as the model of investment for the project has changed.

"In the manner in which the Dhirasram ICD will be constructed now, Bangladesh Railway will construct the main infrastructure, while the ICD will be managed under the PPP arrangement. The private company which will get the partnership will build the superstructure and procure the necessary equipment from their own findings," he said.

Md Abul Bashar, director general of the Public Private Partnership Authority, told TBS that DP World had provided an integrated concept for the development of freight train transportation logistics in the Dhaka-Chittagong rail corridor and the Dhirasram ICD was a part of that.

"DP World basically discussed with the railway authorities over the project as they are entitled to make a final decision on the ICD project. They [BR] have to decide in which model they will implement the Dhirasram ICD project," he said.

Forecasted container throughputs

Chattogram port handles almost all international containers in Bangladesh. The road is the dominant transportation mode for the movement of international containers. On the other hand, container freight trains carry only 3% of the domestic movement of international containers. Container freight trains are in operation only between Kamalapur ICD and Chattogram port, according to Bangladesh Railway.

In 2021, Chattogram port handled around 3.1 million TEUs of containers. Meanwhile, Kamalapur ICD handles around 90,000 TEUs annually, operating at or above its capacity.

Kamalapur ICD is the only ICD with a rail link and is suffering from congestion inside as well as road congestion outside. The Dhirasram ICD project is to strengthen container transport capacity by rail.

An ADB report said Dhirasram ICD being located near Dhaka and along the Dhaka-Chattogram rail corridor has strategic advantages to becoming a logistic hub of regional trade.

"The project will be a fundamental project for the facilitation of Bangladesh-India trade too. At present road transport is the dominant transport mode in bilateral trade, accounting for around 70% share in weight. Rail has a small share but there is no international container freight train operating regularly. Bangladesh and India are promoting international container trains between the two countries."

According to the ADB report, Dhirasram ICD is expected to contribute to the improvement of BR's operation ratio because it will enable BR to operate more container freight trains. At the completion of the Akhaura-Laksam Double Track project scheduled for June 2023, the most important rail corridor between Dhaka and Chattogram will become fully double-tracked, although gauge conversion for broad gauge train operation will not be completed yet. 

Container cargo is important to BR's financial performance because it accounts for 33% of BR revenues from freight transportation.

BR moves to boost freight transport

Meanwhile, after years of a passenger-bias approach, Bangladesh Railway now makes fresh moves to improve freight transport to facilitate trades and boost its revenue earning. It has planned a $1.68 billion project to overcome its infrastructural bottlenecks and raise its modal share in container freights on the route, according to officials.

Freight rail has the potential to carry 25% of container traffic countrywide – equivalent to removing 500 container trucks per day from roads, they said, adding that railway's capacity constraints, however, limit the services to only 10% as only two container trains currently operate on Dhaka-Chattogram route – the major trade and transport artery of Bangladesh – every day.

They said the project had been designed after the World Bank showed interest in it, and expected the Washington-based lender would finance $1.09 billion.

With a 2030 deadline, the master plan includes development of the Dhaka-Chattogram rail corridor, remodelling Dhaka's Kamalapur station yard, a transport hub at Dhaka airport rail station and buying 20 cargo locomotives.

SM Salimullah Bahar, chief planning officer of the Bangladesh Railway, said they had prepared the plan focusing freight train frequency on the route.

"This will boost rail revenue, ease pressure on the Dhaka-Chattogram highway, and make cargo transport on the route easier and cheaper," he told The Business Standard.