Chinese padma rail contractor alleges mismanagement, cash crunch

China Railway Group Ltd (CREC) – contractor of the Padma Bridge Rail Link Project – says it is in a cash crunch due to pending payments worth around $400 million, which "seems to have emerged as an impediment to completing the construction process".

In a press release sent on Wednesday, Forethought PR Limited, the CREC's communication agent in Bangladesh, said the contractor blamed the project authority's mismanagement and Bangladesh Railway for not disbursing the fund for completed work.

Forethought PR confirmed to The Business Standard that it had sent the press release on behalf of the CREC.

When approached for comments, Bangladesh Railway's Director General Dhirendra Nath Mazumder said he had no knowledge about the matter and advised contacting the project director.

The Business Standard also tried to get in touch with Project Director Golam Fakhruddin A Choudhury, but he did not respond to phone calls and text messages till filing of the report. Railways Minister Nurul Islam Sujan and Secretary Salim Reza also could not be reached.

The press release said the CREC received the mobilisation payment at the end of June 2018, "but due to internal reasons of Bangladesh Railway, CREC did not receive any more payment until September 2020".

"During this long period, CREC had to borrow huge amounts of commercial loans from banks to continue the project execution," the release said, adding that the time consumed by the Bangladesh Railway for processing each interim payment has been much longer than they had expected.

The press release added that on 27 October, it submitted the bill for work done between June and September last year. But the Bangladesh Railway did not send the instruction to the Exim Bank of China – the financier of the project – for releasing the foreign portion of the expenses until 9 February.

Moreover, the local portion is still pending "due to a lack of planning and coordination of Bangladesh Railway".

Exim Bank of China will not release the foreign portion before the local portion is paid, and CREC did not receive any payment within 115 days after the bill was submitted, the release said.

The firm claimed that they have only received the payment for work completed in and before June 2020, while the payment for work completed in the last seven months is still being processed by Bangladesh Railway at a slow pace.

"CREC cannot procure sufficient construction materials, and cannot pay subcontractors and suppliers in a timely manner. Project execution is naturally slowing down, and project costs are increasing day by day," reads the release.

It added that the Bangladesh Railway is yet to provide any instruction to manufacture 100 coaches, which were set to be delivered by June last year. The CREC has repeatedly informed the authorities that it will take two years to manufacture and deliver the coaches.

"CERC has been putting sincere efforts to keep the project going on even amidst Covid-19, but they need support and cooperation from their partners for the smooth and timely execution of the project," concludes the press release.

Fund crisis for the project has already been discussed in the several forums of the railways ministry, the project authorities, the Planning Commission and the Economic Relations Divisions.

The need for additional allocation for the project worth Tk1,201.40 crore was identified at the meeting held on 4 January to prepare a revised budget of the Ministry of Railways, in the absence of Railways Minister Nurul Islam Sujan.

Following the meeting, the ministry sent a proposal for allocating an additional Tk1,801 crore for the project in the Annual Development Programme (ADP) of the current fiscal year.

In the proposal, the railways ministry said, "It is not possible to pay the contractor now since 93% of the public fund for construction has been spent already, prompting a budget crunch."

According to the planning ministry, the government has allocated Tk3,684.64 crore for implementation of the project in the current fiscal year. Of that amount, Tk2,224.52 crore has been spent in the first seven months.

Bangladesh Railways began implementing the Padma Bridge Rail Link Project from 1 January 2016. The latest revised cost of this project is Tk39,246.80 crore, of which, the Exim Bank of China will provide Tk21,036.69 crore.

The Bangladesh government plans to complete the rail link within June 2024. Moreover, the government wants to launch a train service between Bhanga and Mawa during the inauguration of the Padma Multipurpose Bridge next year.