China's loan availability period for the Padma Bridge Rail Link project is set to expire on November 17, 2024, posing a significant challenge for Bangladesh.
China has made it clear that it will not extend the bill payment period beyond this date, despite many works on the project remaining incomplete.
Bangladesh Railway is seeking an additional six months to cover bill payments, but China's reluctance to grant an extension has created uncertainty.
According to Bangladesh Railway, a proposal has been sent to the Chinese Exim Bank, requesting to use savings from the "Provisional Sum" and "Price Adjustment" sectors under the project's physical contingency budget.
However, no approval has yet been received, and the primary concern now is completing the remaining works and settling all bills before the loan availability period ends.
Despite requesting a one-year extension, Exim Bank of China had previously agreed to extend the loan availability period by only six months.
This shorter extension adds pressure to complete the remaining project tasks. In July and August 2024, work progress was slower than expected, making it increasingly difficult to meet the revised timeline.
Without additional time, significant portions of the project could remain unfinished.
A proposal to use approximately $93 million from the savings loan for additional work is still under consideration by China's Exim Bank.
However, the delayed decision could exacerbate the challenges faced by the project.
Financial woes and project delays
The Padma Bridge Rail Link project was initially approved on May 3, 2016, with an estimated cost of Tk 34,989 crore. However, by May 22, 2018, the project cost increased to Tk 39,247 crore.
China is lending $2.66 billion through the Exim Bank to fund the project, while the Bangladesh government is covering the remaining costs. Of the total, Tk 18,210 crore will come from public funds, and China is providing Tk 21,036 crore.
Since the project's launch in January 2016, the completion date has been extended multiple times, with the latest deadline set for June 2025.
As of August 2024, the overall physical progress stands at 96%, while financial progress lags slightly at 85.98%. A significant challenge remains in completing all remaining work and settling payments before the loan availability period ends in November 2024.
The Dhaka-Mawa section of the project has achieved 97.55% progress, and the Mawa-Bhanga section has reached 99.55% completion.
Bangladesh Railway's Project Director, Md Afzal Hossain, expressed concerns about the tight timeline.
"We have requested an additional six months. However, given the current pace, even this might not be enough to finish all the work. We are waiting to see how China responds," he said.
Completion of key sections and station works
Trains began operating commercially on the Dhaka-Bhanga section on November 1, 2023, and progress in the Bhanga-Jesho section is also nearing completion, with 97.62% of the work finished.
Approximately 110 km of railway has been completed in the Bhanga-Jashore section, with only nine station buildings and final signaling work left. However, other works, including the CTC building and the TT Para underpass, require additional time until January 2025, with some works potentially extending into April 2025.
The Chinese loan's availability period remains a critical concern, as major works such as Bhanga Junction Station and the TT Para underpass are only 70% and 60% complete, respectively. The estimated cost for completing these sections is $36.72 million, and without an extension from China, these debts will remain unpaid.
Budget reductions and cost savings
The Padma Bridge Rail Link project's second revised project expenditure stands at Tk 38,624 crore, down from the previous estimate of Tk 39,246 crore.
According to the revised project development proposal, the GOB (Government of Bangladesh) portion saw a reduction of Tk 541 crore, while the project loan portion decreased by Tk 80 crore, resulting in an overall project cost reduction of Tk 621 crore.
While these savings may help alleviate some financial strain, the looming deadline for bill payments poses a critical challenge for Bangladesh Railway.
If no further extension is granted by China, the project may struggle to complete essential tasks, further delaying its full operational potential.