Authorities stick to pricey water supply to Bangabandhu Shilpa Nagar

Bangabandhu Sheikh Mujib Shilpa Nagar, the country's largest economic zone, will be supplied with water at a price more than double the current market rate from Meghna River via a 150km pipeline.

Despite opposition from investors in the zone, relevant authorities under the previous government said the price of water although would be pricier than what WASA offers, it will be still cheaper than in economic zones of other countries.

South Korean company Taeyoung Engineering and Construction will invest $1.5 billion in the project under G2G (government to government) arrangement, according to sources. The company will supply 250 million litres of water per day (MLD) for 19 years, following a three-year period to complete the pipeline installation.

This supplied water will cost Tk91.30 per 1,000 litres. Including service charges and other costs, this amounts to around Tk107 or $0.91 based on the current exchange rate.

Investors who have leased land in the industrial city voiced their dissatisfaction with the water prices during a meeting with the Bangladesh Economic Zones Authority (Beza) in early July. They pointed out that the proposed rate is more than double the current commercial rate of around Tk45 per 1000 litres in Bangladesh.

However, the Finance Division, Public-Private Partnership Authority, and Beza at a meeting on 29 July decided to go ahead with the plan, claiming that they had negotiated a fair price and any other alternatives would be time consuming and costlier.

Beza's Executive Chairman Md Sarwar Bari told The Business Standard that while the cost of supplying water from the Meghna River would be higher than the current market rate, it is still lower than the rates in economic zones of other countries.

For instance, in the Philippines and Vietnam, the price of water supplied to their economic zones ranges from $1.30 to $2 per tonne (1018.32 litre), he added.

Md Abul Bashar, director general of the PPP Authority, informed TBS that in other countries, the maximum length of a water pipeline to an economic zone is 87 km, and none provide water for less than a dollar per unit.

"Our pipeline will be over 150 km long, but negotiations with the Korean company have set the price at $0.91 per unit," he added.

He mentioned that 72% of Korean investment will be used for the pipeline. The project will be run on a PPP basis for 22 years, with a three-year pipeline construction period.

The feasibility study is almost complete, and after signing a tripartite agreement between Beza, the Public-Private Partnership Authority, and Chattogram WASA, the final agreement with the Korean investor will be concluded, added Bashar. The project will be under Chattogram WASA on behalf of the Bangladesh government

Details of the project

According to the PPP Authority, the proposed pipeline is 150.8km long and includes: 19km for raw water from the Meghna River to a water treatment plant, 114.1km for treated water from the plant to the clear water reservoir, and 17.7km for delivering treated water from the reservoir to Shilpa Nagar.

An official from the Authority said the project is now a priority due to delays in Shilpa Nagar development and Korea's proposal to bring water from the Meghna River as a reliable solution.

"In the first phase, they plan to supply 250 million litres of treated water per day directly to the economic zone," added the official. Because of this project's massivity, the construction cost shall be returned by the water price.

The PPP Authority estimates that, based on the Korean G2G proposal, water supply could start by 2030. Any alternative approach could delay the project by at least five years.

The Authority asserts that the water tariff is justified, and the reduced timeline will boost Bangladesh's industry revenue while utilising foreign investment for infrastructure without adding debt.

Beza can meet water needs for 7-8 years

A Beza official told TBS that Bangabandhu Shilpa Nagar was planned for 33,800 acres, but currently covers 17,000 acres, with 4,000 more under acquisition. No additional land is available. The full 33,800 acres would have needed 950 MLD of water daily, but the current land requires about 550 MLD per day.

The project to supply 50 MLD of water from Feni reservoir is nearly complete. A second phase will add another 50 MLD. Additionally, three common effluent treatment plants (CETP) funded by the World Bank will provide 50 MLD for reuse, and 90 MLD will be desalinated for the economic zone.

This will meet water needs for the next 7-8 years under Beza's management, said the official.

Due to water shortages, land allocation for high-water-consuming industries like steel and cement has been halted, added the official. "Beza is encouraging these industries to invest in Jamalpur, Kushtia, and Sirajganj economic zones, where water supply is more reliable."