Railway on track to launch land business

Bangladesh Railway is about to launch a business of leasing out its highly expensive lands. About 200 acres of undisputed land has already been identified for investment of public and private partnerships (PPP) in the big cities including Dhaka and Chattogram. That means the railway authorities will provide the land, and private companies will construct the infrastructure. Such projects are multimodal hub constructions. As part of this move, a decision has been made to demolish the historical Kamalapur railway station.

Already 12 similar projects have received the approval on principle from the government’s cabinet committee on procurement. A private company has been appointed for the construction of a hospital and a shopping mall in Chattogram city. A Japanese company has made preliminary designs for the multimodal hub project around the Kamalapur railway station. Investors are being selected for the rest of the projects. Besides, three more projects are about to get approval.

The routine activities of the railway can be broadly divided into two categories -- work related to railway management (core business) and minor work (non-core business).

Railway management related work includes expansion of the railway network, increasing passengers and freight, and ensuring passenger service. The minor work includes leasing the lands allotted by the government, renting out the fiber optics and allotting shops or markets to earn revenue.

According to the documents related to the PPP project, 13 of the 15 approved and awaiting projects fall under the minor category. Only two of the projects are related to the railway management. These two projects are – construction of a circular railway surrounding the capital and an internal container depot (ICD) at Dhirashram in Gazipur district.

Transport experts and some railway officials think that the main priority of the organisation should be improving the quality of passenger service. Besides, the company’s revenue can be raised further by increasing freight transport. The railway cannot sustain by increasing minor work only. Later, it will be difficult to coordinate between the major and minor works.

The government has spent nearly Tk 750 billion (Tk 75,000 crore) in the last 11 years on railway development. Despite raising the passenger fare and freight transport costs twice in 2012 and 2016, the operating loss of the railway was nearly Tk 20 billion in the last fiscal year. Despite huge investments, the time schedule of the railway has not improved much. The duration of railway trips has also increased exponentially. Due to the lack of workforce, 111 railway stations have been closed down.

Sources at the policy making level of the railways are saying that corruption in the implementation and procurement, unplanned project implementation and lack in management are the main reasons for the loss of the railway despite huge investments. Under the circumstances, it is not justified to take up business project using their costly land.

Railway minister Nurul Islam told Prothom Alo that, the government has a policy decision that 70 per cent of the cost of a development project will come from the loans or the government. The cost of the remaining 30 per cent of the development projects will come from PPP. All these projects are undertaken to attract private investment. The railway’s revenue will also increase. Besides, these lands, which the railway could not utilise properly, will come to peoples’ use. He said the railway service will further improve once all the ongoing bridge and railway construction projects are finished.

Regarding the demolition of Kamalapur railway station, the minister said that the station would have lost its beauty anyway due to the construction of metro rail. The plans undertaken for the development of this area will attract peoples’ attention.

No account of estimated profit and loss

The railway authority has allocated lands for the implementation of different development projects of the government in the past. They also allocated land for petrol pumps and CNG refueling stations on political consideration, NGOs, and to individuals. The railway only gets Tk 15 to 20 million (1.5 -2 crore) in return per month. This is because the officials in charge amass several times the money that the railways earn from leasing their land.

This year there has been no account of the estimated profit of the railways from constructing a five-star hotel, an office complex, residential buildings and a hospital under the PPP project. They have not conducted any survey regarding this.

As a result, there is no way of learning whether there is any demand for hotels at all or not at the places selected for the construction. There are already several public and private medical colleges and hospitals in the big cities. There is no answer to the question of where these newly built hospitals and medical colleges will get the required teachers, physicians and students.

Several officials associated with the PPP project said that negotiation is ongoing on the basis of the estimation given by the investors. So there will be problems with the liability in future, if the project fails to make any profit. These lands are precious and uncontroversial according to them. If there are any miscalculations, it would amount to just giving the land as a gift to the companies.

Hotels, shopping malls and guest houses

According to the documents, the local real estate company Epic Properties Limited had been appointed -for the construction of a five-star hotel and a shopping mall cum guest house in August last year. This company was given about half an acre of land near the Chattogram regional head office of the railways. The infrastructural construction is estimated to be finished within four years. However, the company is supposed to return the property to the railways after 40 years. The estimated cost of this project is Tk 452.4 million (Tk 45 crore 24 lakh).

A 1.2 acre land has been allocated for the construction of a multistoried residential cum commercial complex at the polo ground in Chattogram. The estimated cost of this project is Tk 8.5 billion (Tk 850 crore). Another two and a half acres of land have been allotted for the construction of the icon building in Chattogram railway station premises. The estimated cost of this project is Tk 8.5 billion (Tk 850 crore). Proposals for these two projects are now waiting for the approval at the railway ministry.

There are 11 large shopping malls in Chattogram, the second largest city of the country. There are countless area-based markets too. There are two five-star hotels -- Radisson Blu and Best Western Alliance. Three more star hotels are under construction currently. Beside these, there are countless traditional hotels in the city. The railways do not have a clear idea whether it will be profitable or not to construct a five-star hotel or shopping mall there given the circumstances.

The project of a multimodal hub surrounding the airport and Kamalapur railway station was undertaken in 2018. Under this project, hotels and commercial complexes are to be constructed. The estimated cost of these two projects is Tk 13 billion (1,300 crore).

Discussions are on with the Kajima Corporation of Japan for the implementation of these two projects. Kajima has already finished the initial design of the Kamalapur project. The process is ongoing to affiliate the Bangladesh University of Engineering and Technology (BUET) with the project. The people associated with the project are saying that Kamalapur railway station will be demolished. A new station will be set up on the north side. Along with this, Shahjahanpur railway colony and the adjacent areas will come under this project. Multistoried buildings will be constructed. The plan is the same for the airport railway station too. However, there is not enough railway land there. Steps have been taken to ask the civil aviation authority for the land.

According to the Ministry of Civil Aviation and Tourism, there are currently 18 five-star hotels in the country. Among them eight are in Dhaka, four in Cox’s Bazar, two in Chattogram, and one each in Jashore, Bogura, Habiganj and Moulvibazar.

There are a lot of residential hotels around the Kamalapur railway station. The historical Purbani Hotel is near the station. There are several big hotels in the city including five star hotels Le Meridien and Radisson Blu. The hotel business is now almost collapsed due to the coronavirus pandemic. No one knows how many years this situation will continue. The entrepreneurs of hotel Sheraton in Banani of the capital, which is currently under construction, are going to transform the hotel into a hospital named Dhaka Hospital.

Near the Khulna railway station, a 1.78 acre land has been allotted for the construction of a shopping mall and a guest house. The estimated cost is Tk 1.2 billion (1,200 crore). The contracts and the tender documents have already been prepared. However, currently there is a shopping mall in the city run by private enterprises. There are also many markets in the city. Currently there are a total of 36 private and public guesthouses. So there will be questions about the necessity of constructing further more hotels and shopping complexes in the land owned by the railways or how successful the business will be. Efforts are underway to implement the government-to-government (G2G) approach with South Korea.

The ICD construction project in Gazipur’s Dhirashram was approved in 2013. There had been talks about this project since 2009. The freight transport of the railways will increase if the project is implemented. As a result, the overall revenue of the railways will increase.

According to the railway sources, these two projects are necessary for the Bangladesh Railway. However, no private company is showing any interest as the railways do not own any land here. Without land, huge investment will be needed. The private entrepreneurs are more interested in railway’s land projects.

Transport expert Prof Shamsul Alam told Prothom Alo that the main duty of the railways is to enhance the passenger service. The railway authorities could have increased their income by transporting containers and freights. The Indian railway has become successful by doing the same. However the rail authorities of Bangladesh failed to do so.

Regarding the PPP project, he said the railway lands are undisturbed, situated at the centre of the city and valuable. So, the railways should get more profit than the investors in these PPP projects. It is the duty of the railways to ensure this while negotiating with the investors. Otherwise, it will be like gifting the land to the investors, nothing else. It should also be ensured that the railways will not have to bear the liability if the land projects fail amidst the crowd of hotels and shopping malls in the big cities.

This report appeared in the print and online editions of Prothom Alo and has been rewritten for the English edition by Ashish Basu.