MRT Line-1 and -5: Pricey dollar, inflation to double costs

The Metro Rail Line-1 and -5 could end up costing more than double the original estimate because of the appreciation of the US dollar, inflation, and new taxes, found the government’s independent expert committee.

“The price of everything is now higher than five or seven years ago, when the original development project proposal was prepared,” said Shamim Z Bosunia, who led the seven-member independent expert committee formed in May.

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In economic analysis, inflation must be calculated algebraically, but the committee calculated it at a 5 percent rate.

The US dollar has appreciated by 20 percent against the taka, said Bosunia, an emeritus professor at the Department of Civil Engineering of the University of Asia Pacific.

Furthermore, higher tax rates have been introduced, he said.

“Based on the existing design, plus the design we suggested, we conducted an economic feasibility study, which was not an engineering study. We did that, and the costs have increased; that’s all.”

The designs of a few stations have undergone major changes, too.

As a result, the committee estimated that the MRT Line-1, which is 31km long, will cost almost Tk 110,000 crore, up from Tk 52,561 crore, and MRT Line-5 Tk 88,000-90,000 crore from Tk 41,238 crore as originally thought.

“We are confident that our analysis is correct,” Bosunia said.

Asked why the metro rail construction in Bangladesh costs more than in many other countries, he said: “Comparing it with Delhi or Kolkata won’t work. Think a bit rationally. Many things are available locally in India -- diesel, iron, cement, stone -- everything is in their country. What does Bangladesh have? Almost everything has to be imported to some extent. So, comparing it with India serves no purpose.”

The committee submitted its report to the government early this month.

DMTCL PROPOSAL

The Dhaka Mass Transit Company sent its revised proposal for the two metro lines to the Road Transport and Highways Division, which forwarded it to the Planning Commission last week, The Daily Star has learnt from planning ministry officials involved in the proceedings.

For MRT Line-1, the company proposed a revised cost of Tk 120,794 crore, of which the Japanese financing portion is Tk 85,535 crore. In the original proposal, the total cost was Tk 52,561 crore, with Japan’s loan share at Tk 39,450 crore.

The original project tenure was from September 2019 to December 2026, but the revised timeline has been extended to December 2035.

The proposed revised cost for MRT Line-5 is Tk 93,190 crore, of which the Japanese financing portion is Tk 68,931 crore. In the original proposal, the total cost was Tk 41,238 crore, with Japan’s loan share at Tk 29,117 crore.

The original project tenure was from July 2019 to December 2028, but the revised timeline has been extended to December 2034.

The next steps, regarding the DMTCL’s proposals, will be taken after a cost review during the Proposal Evaluation Committee meeting.

Implementation of the two projects had virtually stalled during the interim government’s tenure after the cost of various packages increased abnormally following tender submissions.

At that time, officials of the then-government, including the finance adviser and planning adviser, held multiple meetings with the Japanese government to reduce costs.

Then finance adviser Salehuddin Ahmed even visited Japan to hold meetings regarding cost reductions. However, as there was no positive signal from Japan, work on the projects effectively came to a halt.

After the current government came to power, Finance and Planning Minister Amir Khosru Mahmud Chowdhury held a meeting with planning ministry officials and the related departments. He instructed them to negotiate with Japan to minimise costs as much as possible with the view to resuming the projects.

Bosunia said, “If the government wants to save Dhaka, it should immediately initiate the project process, as the interest rate being offered by Japan will not always be available.”

Japan offered an interest rate of 0.9 percent for the project. Bosunia said Japan has increased interest rates globally over the last few year, but kept 0.9 percent rate for these projects.

He said if the projects are scrapped and started afresh with new development partners, such a low interest rate may not be available.

As of June last year, Tk 3,176 crore has been spent from the MRT Line-1 project and Tk 5,011 crore from the MRT Line-5 project.