The Bangladesh Railway will purchase 70 diesel-electric metre-gauge locomotives to strengthen services across the country.
The Standing Committee on Non-Concessional Loan approved the funds on Tuesday for purchasing the locomotives, nine years after the project was taken up. The decision was made at a meeting chaired by Finance Minister AHM Mustafa Kamal at the finance ministry.
The railway ministry will get $280 million in non-concessional loans from the Standard Chartered Bank and Sumitomo Mitsui Banking Corporation. The loan is non-concessional because the grant element is 17 percent.
According to the International Monetary Fund guidelines, a loan is considered concessional when the grant element is above 25 percent. The interest burden will be calculated at six-month average of London Interbank Offered Rate, plus 2.40 percent.
Non-concessional loan is a loan extended by an international organisation to a country, on terms that are more generous than the standard market loan terms.
The project got a go-ahead at a meeting of the Executive Committee of the National Economic Council in 2011. The duration for implementation was until June 2017, but later it was extended up to 2024.
The delay was mainly because no soft loan could be managed from any development partner. Tenders were floated twice in 2011 and 2013, but there were no responses.
Then for the third time, tender was floated in 2014, and five companies had submitted documents. The lowest bidder was Vossloh Espana SA Spain.
But the cabinet committee on purchase decided to give the purchase order to the second lowest bidder Hyundai Rotem Company, Korea.
At present, only 262 locomotives are operating throughout the country. Among them, 206 have already expired, but most of these locomotives continue to run.
Run-down locomotives are a major reason why train schedules are hampered frequently. They break down half-way through the journey from one destination to another, and need repeated repairs in close intervals.
Moreover, spare parts are not available for the decades-old machinery.