Railway in trouble with projects involving Indian loan

Bangladesh railway is facing difficulties with projects funded by Indian loans. Although six years have passed since India pledged financial support for two projects, the funds have not yet been released. As a result, construction work has not started.

Apart from that, construction work on two other projects was going on under Indian loan. But the Indian workers employed in those projects left Bangladesh following the fall of the autocratic Awami League government on 5 August last year, in the July uprising. Not all of them have returned, which has prevented the projects’ work from resuming at full capacity.

At present, there are seven railway projects under Indian loan financing, including those that are ongoing, under process or in the implementation phase. Apart from the four mentioned earlier, work on two projects has been completed, but they have not yet been officially declared as completed. One project remains in the very initial stages.

According to railway sources, a letter was sent to Indian authorities from Bangladesh last December, asking whether India will indeed provide funding for the two pending projects. The Indian authorities, however, have yet not responded.

Bangladesh has been considering alternative sources of funding suspecting that the Indian loan may not materialise.

Meanwhile, the project’s approval and the starting of the work are taking an extended period, leading to an increased cost. In some cases, the rise in expenditure is attributed to an increase in the scope of work.

Among the two projects for which financial commitments were made six years ago, one involves the construction of a mixed-gauge railway line from Bogura to Shaheed M Mansur Ali station in Sirajganj.

As there is currently no railway track on this route, trains must travel via Shantahar, Natore and Ishwardi in Pabna to reach Dhaka. This detour increases the journey by approximately 120 kilometres.

The project to conduct the 86- kilometre mixed-gauge railway from Bogura to Sirajganj was undertaken in 2018.

Initially, the construction was projected to be completed by 30 June 2023. However, the feasibility study and final design process extended until June last year.

According to the railway sources, the project’s cost has nearly doubled. As a result, on 23 October 2023, the Economic Relations Division (ERD) of the government sent a letter to India requesting an additional approval of USD 300 million (approximately Tk 37 billion). Upon receiving no response, the ERD sent a follow-up letter on 8 September last year.

On 15 December, another letter was sent to the Indian High Commission in Bangladesh through the ERD. In this letter, the Indian authorities were given a one-month deadline to confirm their decision regarding the financing. It was also stated that if no responses were received within the specified time, Bangladesh would seek alternative sources of funding.

According to the railway sources, there are currently no personnel from the Indian contracting firm present in Bangladesh for this project. As a result, the project remains completely stalled. The railway authorities, in this context, have extended the project timeline until 2026.

Speaking about this, Muhammad Fouzul Kabir Khan, Adviser of the Ministry of Power, Energy and Mineral Resources in the interim government, told Prothom Alo that the implementation of Indian loan-funded projects, including those in the railway and power sectors, has been slow.

He also mentioned that there are financial complications related to these projects. Discussions are ongoing with the Indian authorities regarding these matters.

The first commitment for the Indian loan financing in various sectors including railways, roads and waterways was made during the-then Prime Minister Sheikh Hasina’s visit to India in 2010. Indian loans are referred to as Lines of Credit (LoC). To date, a total loan commitment of USD 7.36 billion has been received.

Under Indian loan financing, a project was undertaken in 2018 to convert the railway track from Khulna to Darshana into a double-track system. However, four years were spent merely on appointing consultants for the feasibility study and final design preparation. In June last year, the final design was submitted by the joint consulting firm STUP Consultants-RV Associates of India.

According to railway sources, the Indian consulting firm carried out all its work with the approval of the Indian authorities. Based on their design, the project cost needs to be increased, and India will also need to enhance its financial contribution. This matter has been formally and informally communicated to the Indian authorities multiple times. However, since the political transition in Bangladesh on 5 August last year, India has not responded.

The Khulna-Darshana double-track rail project was originally scheduled for completion in 2022. However, the deadline has now been extended until 2025.

A letter was sent to India last December requesting a decision on whether it will finance the project, but no response has been received to date.

Among the two ongoing projects under Indian loan financing, one involves the construction of the third and fourth mixed-gauge railway lines on the Dhaka-Tongi route and the double mixed-gauge railway line from Tongi to Joydebpur.

The Government of Bangladesh approved this project in 2012. However, it took six years to complete the tender process. The project was approved without a feasibility study, requiring design modifications during the implementation phase.

Both the cost and timeline of the project have increased significantly. The new completion deadline has been set for June 2027.

According to railway sources, the overall progress stands at 60 per cent based on the original scope of work. However, additional tasks have been incorporated, reducing the actual progress to just 38 per cent.

Initially, the project involved constructing approximately 71 kilometres of railway tracks, which has now increased to 138 kilometres. Additionally, a decision has been made to modify the weight of the rail tracks.

In 2023, Bangladesh’s Cabinet Committee on Public Procurement approved the additional work, subject to India’s consent. The increased cost and design modifications were submitted to the Indian authorities for approval in late 2023. However, no response has been received yet.

Similarly, a project to reconstruct approximately 45 kilometres of railway track from Kulaura in Moulvibazar to Shahbazpur near the Indian border was initiated in 2011, with an initial target of completion within one year.

Later, a decision was made to convert it into a mixed-gauge double line under Indian loan financing, along with additional enhancements, which increased the project cost. A contractor was appointed in 2018 with the objective of completing the project within two years.

However, the deadline was extended multiple times, with the latest completion target set for December last year. As of now, only 51 per cent of the work has been completed.

Moreover, railway sources indicate that further work has been added, necessitating another extension of both time and budget.

The implementation of projects funded by Indian loans that have been completed has also taken a significant amount of time and costs have increased.

For instance, the construction of the railway line from Khulna to Mongla Port, which was initially planned to be completed in three years, actually took 13 years.

The cost exceeded the originally estimated budget by more than double, amounting to Tk 42.25 billion. Currently, only one train operates on this route a day.

A project to establish direct railway connectivity between Akhaura and Agartala was initiated in 2016. The cost for the construction of the mixed-gauge railway line on the Bangladeshi side was estimated at Tk 4.78 billion (478 crore), with the Indian government providing a grant of Tk 4.2 (420 crore).

Railway officials state that the project’s cost was reduced by 33 per cent. It was inaugurated in November 2023, but no trains have yet operated on this route.

One project still in the early stages is the conversion of the metre-gauge line from Parbatipur in Dinajpur to Kaunia into a mixed-gauge line.

This project was undertaken in 2018, with India confirming a loan of USD 12 million for its financing. The survey and final design work is in the final stages; however, there is uncertainty regarding whether the loan will be released.

Bangladesh receives loans from development partner organisations such as the World Bank and the Asian Development Bank (ADB) on relatively easier terms. In contrast, the terms of loans from China, Russia and India are more stringent.

The interest rate for Indian loans is set at 1 per cent, with a commitment fee of 0.5 per cent. In case of default, an interest rate of 2 per cent is applied. The loan must be repaid over a 20-year period, with a 5-year grace period. According to the agreement, 75 per cent of the goods and services must be imported from India.

Professor Samsul Haque, a faculty member of the Department of Civil Engineering at Bangladesh University of Engineering and Technology (BUET), expressed to Prothom Alo that he is opposed to projects implemented on a government-to-government (G2G) basis.

Pointing out the slow disbursement of Indian loans and the sluggish pace of projects financed by India, he suggested that such financing and projects should be reviewed.

Samsul Haque also highlighted that the condition requiring 75 per cent of goods and expertise to be sourced from India is unilateral, and that the selection of projects has been influenced by India’s interests.

* The report, originally published in the print and online editions of Prothom Alo, has been rewritten in English by Nuzhat Tabassum