Ctg megaprojects get costlier from rising dollar, faulty plan

The three ongoing mega development projects in Chattogram, including the Karnaphuli tunnel, are set to see their costs escalate by around Tk1,600 crore owing to planning flaws and soaring prices of US dollar.

The construction of the Bangabandhu Sheikh Mujibur Rahman Tunnel under the River Karnaphuli in Chattogram is nearing completion, with 87% of work on the project done as of June.

At this stage, the cost of the project has been proposed to be increased by at least Tk800 crore in the wake of the depreciation of taka against the US dollar and the addition of some new infrastructure – constructing buildings for police stations, fire stations, buying vehicle scanners, etc – which were not in the original plan.

A draft proposal on increasing the project cost has already been sent to the Road Transport and Bridges Division.

The volatility in dollar price coupled with other factors such as an increase in land prices is also likely to push up the cost of the import-dependent Dohazari-Cox's Bazar rail line by Tk500-700 crore, said project officials.

On the other hand, the Chattogram elevated expressway project is set to face a cost overrun by about Tk1,300 crore owing to delays in implementation. Moreover, increased import expenditures because of dollar getting costlier are expected to add another Tk300 crore to the project cost, according to the project contractor.

Bangabandhu Tunnel

Engineer Harunur Rashid Chowdhury, director of the tunnel project, told The Business Standard that when the project cost was set at Tk10,374 crore after the first round of evaluation, the rate of dollar was calculated at Tk80 per dollar. In the latest draft proposal, the rate has been fixed at Tk92.50, he added.

"We have proposed the dollar rate at Tk92.50, but the [interbank exchange] rate has already increased to Tk94.70. The dollar exchange rate may increase further when the proposal will be placed before Ecnec for approval after scrutiny by the Planning Commission," said Harunur Rashid.

The cost of the tunnel project may increase by Tk200-250 crore because of the rise in the exchange rate of dollar against taka, he informed.

On the other hand, while the authorities are working to open the tunnel for traffic by the end of this year, some new infrastructures that were not included in the initial plan are being added to the project. Because of this, the cost of this project may increase by at least Tk600 crore.

Harunur Rashid said during the preparation of the DPP of the tunnel, the expenditure on building power infrastructure was estimated at only Tk1 crore but after the start of the work, the construction company said the tunnel needs an uninterrupted power supply of at least 15MW.

For this reason, two substations are being constructed at both ends of the tunnel, raising the project cost by Tk82 crore.

Besides, even though there was a plan to scan vehicles before they enter the tunnel, the project contract did not include the installation of scanners. Now, at this moment of dollar crisis, the tunnel authorities are saying that an additional Tk450 crore will be required for the import of the scanners.

Moreover, the costs of constructing buildings for police stations and fire stations on both sides of the tunnel and other expenses will also be added to it, said Engineer Harunur Rashid.

Dohazari-Cox's Bazar rail line

The Dohazari-Cox's Bazar railway project is a priority project of the prime minister. But the project could achieve a paltry 2.5% progress in the last two and a half months, Project Director Mohammad Mofizur Rahman told TBS.

He said, "The overall progress of our project was 70% till mid-May this year. The work has been slow since then as railway tracks, loops, angles, glasses for railway stations, and the oyster-shaped structure of the iconic railway station in Cox's Bazar that was supposed to be shipped from Shanghai, are yet to reach the country. In the meantime, the dollar has become pricier, as a result of which prices of these imported goods are also increasing.

"In addition, contractor companies import some goods and collect some from the local market. But product prices have gone up in both cases because of the prevailing dollar crisis. Hence, they are now asking for additional payment."

Engineer Bimal Saha, project manager at Tama Construction – the construction company in charge of work on the Dohazari-Chakaria portion of the project, told TBS, "Only 20% of work on our portion of the project has been completed. Land acquisition is yet to be done in large areas. As the day goes by, the cost of land is also increasing, due to which the cost of the project is also going up. Therefore, it is not possible to continue work without getting additional allocations."

Project Director Mofizur Rahman said it will take another seven to eight years to complete the ancillary works including land acquisition for the conversion of the railway line to a dual gauge one.

Apart from this, the project cost may increase by Tk500-700 crore due to additional factors including surging dollar prices, he added.

Elevated expressway

When the four-lane elevated expressway project from the port city's Lalkhan Bazar to Shah Amanat Airport was approved in 2017, it was supposed to be completed within three years. The project completion deadline has been extended twice and is scheduled to be completed this year. On the other hand, the project cost was estimated at Tk3,250.83 crore at the time of its approval.

Recently, the project authorities have sent a revised development project proposal (DPP) to the Ministry of Housing and Public Works seeking an extension of the project completion deadline until June 2024 and an increase in the project cost by Tk1,300 crore to Tk4,550 crore, said Mahfuzur Rahman, Executive Engineer at the Chittagong Development Authority (CDA) and director of the elevated expressway project.

In the meantime, dollar prices have gone up, which is expected to add another Tk300 crore to the project cost, according to the people concerned.

Asked about the probable cost escalation because of the dollar crisis, Project Director Mahfuzur Rahman acknowledged that contractors have to import construction materials at higher prices because of the devaluation of the local currency, but there is no scope for raising the project cost for this reason as the work order was awarded prior to the crisis.

Hasnain Kabir, planning manager of Max-Rankin – the project's contractor company, however, told TBS that most of the raw materials and parts of machinery being used in the project have to be imported from abroad.

These products are brought in step by step, he said, adding that they will need additional budget to complete the construction work because of the rising dollar price.

"We will calculate this cost and inform the project manager about it," he said.

The implementation of the project will be difficult if they are not allocated the additional cost required in the wake of the rising dollar price, he added.

Poor planning blamed

Asked about these issues, Debapriya Bhattacharya, distinguished fellow at the Centre for Policy Dialogue (CPD), told TBS that these problems arise mainly because the pre-feasibility studies of these projects are not completed properly, which also become evident at various times of revising the project costs.

As these projects are taken up in haste, adequate preparation cannot be made for them. In the end, the projects take more time and money to complete.

Temporary pause in purchase advised

Almost all other megaprojects in the country are experiencing cost overruns due to the increase in dollar price and lack of proper planning.

In this situation, economists have recommended that purchases relating to these development projects be put on hold for the time being.

Selim Raihan, executive director of the South Asian Network on Economic Modelling (Sanem), suggested reviewing the development projects and cutting unnecessary expenditures, if any, at this crisis period. Besides, if the freshly added expenditures can be halted even for the time being, then it will help to overcome the current crisis, he added.

Md Alauddin Majumder, professor of economics at Chittagong University, told TBS that the present crisis is a "cyclone time" for the country's economy.

If project costs increase only because of the exchange rate, purchases for the megaprojects must be put on hold for some time in light of the current situation, he observed.