India keen on rail project as China quits over revised cost

TBS Infograph

Indian state-run Ircon International has come forward and promised to ensure financing of the conversion of Akhaura-Sylhet metre gauge railway line into dual gauge if awarded the job as China backtracked on implementing the project citing cost reduction.

A Chinese contractor won the project through a government-to-government (G2G) arrangement in April 2019 when the Executive Committee of the National Economic Council (Ecnec) approved Tk16,104 crore as the project cost.

Later, the cost was deemed to be much higher than other similar projects and the Prime Minister's Office (PMO) revised it down by more than Tk3,354 crore. China then informed the PMO of its decision not to go ahead with the funding and the construction.

In a recent letter to Railway Minister Nurul Islam Sujan, Ircon said it was willing to implement the project through funding form the Exim Bank of India.

It also said it had completed more than 16 projects in Bangladesh since 1986 and its familiarity with the local terrain and socio-economic conditions near the project site would be an added advantage in executing the railway project.

Those involved in the sector said projects implemented through G2G initiatives with Chinese funding cost very high and there was no open invitation of tenders. Similarly, only Indian contractors are invited to submit tenders for implementation of India-funded projects.
In the Akhaura-Sylhet railway project, Ircon will be the contractor if Indian fund is used.

Experiences with the ongoing and previous projects that have been funded by India do not hold much hope, sources said. Indian contractors took more time than expected to begin construction and did not bring building materials to the sites on time.

There is evidence of use of low-quality materials in railway projects as well. Several reports of the railway ministry also pointed out that Indian contractors did not pay heed to complaints.

On the other hand, if projects are funded by development partners, such as the World Bank, the Asian Development Bank (ADB) or the Japan International Cooperation Agency (Jica), contractors across the world can participate in tenders.

The railway ministry, however, said it still wanted to discuss the project with China and was not thinking of the proposal by India. If China does not come back to the negotiation table, the government will consider India, World Bank, ADB or Jica as alternative sources of funding.

Md Khaled Hussain, joint secretary to the railways ministry, said the Economic Relations Division (ERD) would see the matter of funding of the project.

He said no conclusion had been drawn yet regarding Chinese funding. The railways ministry will write to the ERD to look for other sources of funds after the government reaches a final decision.

In doing so, the authorities will see which source of loans will better serve the interest of Bangladesh, Khaled said.
Mirana Mahrukh, joint secretary at the ERD, said China had asked Bangladesh to revise the proposal, but the railway ministry was yet to send a revised version to the ERD.

Planning Commission objects to Chinese funding

A project proposal to change the 225km Akhaura-Sylhet metre gauge railway line into dual gauge was made at the beginning of 2018 and the cost was estimated at Tk15,705 crore. The Planning Commission at the time objected to the proposal upon analysing costs of other similar projects.

In a report, the Commission said the estimates in the proposal of ballasts, slippers and other materials were much higher compared to costs of other projects of the same nature. Overall, the cost of the Akhaura-Sylhet rail line project was several times the costs of other projects, which was

why, the Commission said, accepting Chinese funding would not be prudent.

For example, the cost of per kilometre construction of the Akhaura-Sylhet rail line was set at Tk56.72 crore whereas building the Akhaura-Laksam dual gauge railway tracks cost the government Tk24.80 crore per kilometre.

The selection of a contractor without any competitive bidding procedure was another reason behind the objection, the Commission said.

The finance ministry finally decided to cancel the implementation of the railway project with Chinese funding.

The Planning Commission said the dual gauge railway line, if constructed, would not increase train operations on the route. If a double line and a dual gauge were set up, only then people would be benefited, it added.

The then finance minister AMA Muhith echoed the view in a letter.

Due to the opposition of the Planning Commission, the project proposal was not placed at the Ecnec meeting at the time.

But after the change of the government and the change of the finance and planning ministers, the Akhaura-Sylhet railway project got approval of Ecnec in 2019 with the project cost fixed at Tk16,104 crore.