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Railway’s endless struggle to get locomotives
ADB uninterested to finance procurement of 70 engines
TUHIN SHUBHRA ADHIKARY
The crisis over a Bangladesh Railway (BR) project to procure 70 metre-gauge (MG) locomotives is refusing to go away.
Taken in August 2011, the project faced different difficulties -- from issues relating to the tendering process to problems with funding -- over the years.
When South Korean Hyundai Rotem Company (HRC) was finally selected for the project in October 2018, costs rose to Tk 2,659.33 crore from the original Tk 1,946 crore.
But, three years into the contract, HRC in December last year said it wants to pull out from the project, after the government asked it to manage soft loans instead of non-concessional ones, as agreed by both sides earlier. It is worth noting that authorities have already spent Tk 5.22 crore on the project till now. When the project’s fate was hanging in the balance, BR took a fresh move to manage funds.
The state-run transport agency has requested Asian Development Bank (ADB) to provide $111 million, which BR saved from two ADB-funded projects, to the ailing one.
However, while holding a meeting with BR high-ups in Dhaka yesterday, an ADB delegation -- led by Ravi Peri, director of ADB’s transport and communications division, South Asia Department -- said it is not interested in financing the project.
In this situation, Implementation Monitoring and Evaluation Division (IMED) and Central Procurement Technical Unit (CPTU), whose suggestion was sought by BR, may recommend cancelling the project or completing it with government funds, albeit by curtailing the number of locomotives to be procured.
PROBLEMS EVER-PRESENT
In August 2011, the government took up the project to procure locomotives to mitigate the growing crisis of rail engines and expand BR’s services.
However, BR is still facing the crisis, as 82 percent of the 171 MG locomotives and 55 percent of 92 broad-gauge (BG) locomotives are past their 20-year economic lifespan.
The new locomotives were supposed to be added to the BR fleet within June 2017, but project authorities could not even complete the bidding process by that time. The first two tenders got no response. The third tender invitation was published on December 22, 2014. Among five bidders, a Spanish company and Hyundai Rotem were found responsive.
The Spanish company was not selected, however, because it changed its registered name. Later, Hyundai’s proposal was accepted on May 16, 2018.
In the meantime, the project deadline was extended twice -- once till June 2018 and then till June 2019. The project cost remained the same.
In October 2018, the project was revised, taking costs to Tk 2,659.33 crore, and a fresh deadline was set: June 2024.
In the same month, BR signed a deal with Hyundai for procurement. As per the agreement, Hyundai was supposed to arrange the required funds.
In February, 2020, the standing committee on non-concessional loan approved the Tk 1,946-crore fund. The railway ministry was supposed to get $280 million in non-concessional loans from two foreign banks.
The project, however, got stalled since the loan agreement could not be signed. After the project authorities sought opinions from Economic Relations Division on the draft loan agreement, ERD in August last year forwarded the Finance Division’s opinion on the matter.
Finance Division opined that soft loans from South Korea or other sources should be managed, instead of taking non-concessional loans, which come with higher interest rates. When the project authorities asked Hyundai to manage the soft loans, it declined, stating that it would cancel the contract. On January 4 this year, the project implementation committee decided to take opinions from IMED and CPTU in this regard. However, the two bodies are yet to give their decision, said a BR official.
BR PROPOSAL GARNERS NO INTEREST
In this situation, BR told the ADB delegation that $111 million remained unused in two ADB-funded projects -- Akhaura-Laksam Double Line Project and Railway Rolling Stock Operations Improvement Project.