The Chattogram Port Authority (CPA) has decided to step back from the Bay Terminal construction with the Indian Line of Credit (LoC III) tagged by tough credit terms, said a top CPA official.
Requesting anonymity, the official said the CPA is now in talks with the World Bank (WB) about funding for the project.
The international lender has primarily agreed to provide $350 million for breakwater construction and channel dredging for the Bay Terminal.
Meanwhile, Bangladesh continues negotiations seeking more funds for the main project.
Sultan Abdul Hamid, additional secretary (Development) at the Ministry of Shipping, said, "Negotiations are underway. We will be able to mention the size of World Bank funding after the final discussion."
In November 2018, Prime Minister Sheikh Hasina inaugurated the Bay Terminal project. But project implementation is yet to begin owing to a number of issues, including final feasibility study and funding.
Under the project, three terminals will be constructed at Halishahar in Chattogram, with the CPA building and operating one of them. The authorities now aim to begin construction next year and complete it by 2026.
Apart from funding by development partners, the government and the CPA will invest in the project. According to estimates by the World Bank, the CPA's spending would be $1,150 million.
In 2017, Dhaka signed the third tranche of the LoC with Delhi, and $400 million credit was laid down for the Bay Terminal project.
"But the credit terms are tough," said a CPA high official. "The LoC terms stipulate bringing in construction materials from India. Besides, projects with Indian credit must appoint Indian consultants and contractors, and implementations require the approval of the Indian authorities."
The official said, "These delay implementation. Already completed and ongoing work with Indian loans suggest that Indian contractors completely control construction." The World Bank or the Asian Development Bank (ADB) loans, in contrast, do not come with such strings attached.
The CPA said it has notified the Prime Minister's Office and the Economic Relations Division (ERD) about its decision over not using the Indian LoC in the project.
Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said Bangladesh should opt for the loans that are more favourable to it.
"Before availing the loan, credit terms such as interest rate, grace period and contractor appointment have to be discussed to reach a decision. If the terms have already been talked about, we should inform India about our preferences," he told The Business Standard.
The railway authorities will implement another project to connect the three terminals by railroads for container transportation. Besides, another separate project will be taken up for road transport to those terminals.
Of the three terminals, DP World, UAE and PSA Singapore will build and operate the remaining two on public private partnership, and Public Private Partnership Authority Bangladesh has already signed MoUs with them.
Previously, India's Adani Group, Saudi Arabia's Red Sea Gateway Terminal and South Korea's Oceans and Fisheries Ministry showed interest in the Bay Terminal construction.
Each of the terminals will have six jetties, which will be able to host ships with at least a capacity of 5,000 TEUs (twenty-foot equivalent unit).
Around 35 ships will be able to anchor at Chattogram at a time as the Bay Terminal will enable the country to handle an additional 50 lakh containers a year. The vessels will not have to wait for high tides to move around.
In the 2010 primary estimation, construction cost was at $2.1 billion, but it is likely to go up now.