Delays in 6 mega projects cause Tk1.12 lakh crore in economic loss

Delays in timely completion of six major transport infrastructure projects have caused losses amounting to an estimated Tk1.12 lakh crore, shows a review of project documents. The amount would have been enough to build four Padma Bridges.

A significant portion of this sum comprises direct loss through increases in project costs, while a big chunk is financial loss resulting from unrealised tolls and fare revenue from both passengers and freight transport.

Besides, these delays also mean economic loss and delayed benefits for citizens and the country.

The Business Standard has reached this conclusion after analysing data from documents of six project – the Padma Bridge, Khulna-Mongla rail line, Karnaphuli tunnel, Dhaka Bus Rapid Transit, Dhaka-Tongi-Joydebpur railway expansion, and Dohazari-Cox's Bazar rail line.

These projects missed their deadlines by four to 12 years due to inefficiencies, delayed financing arrangements, protracted land acquisition process, and shortcomings in feasibility studies and designs.

Despite being initially granted an average of five years for completion upon approval, their implementation has been challenging.

The Dohazari-Cox's Bazar rail project would be the costliest in terms of estimated economic loss and cost overrun as its completion period took nearly three times longer than planned and the cost was 10 times higher than in the initial plan. The second on the list was Padma Bridge, followed by Khulna-Mongla rail line, Dhaka-Tongi-Joydebpur railway expansion, Bus Rapid Transit, and Karnaphuli Tunnel.

Professor Mustafizur Rahman, a distinguished Fellow at the Centre for Policy Dialogue, told TBS that delay in the project implementation creates multiple losses beyond the project cost hike.

Delays in projects created missed opportunities including consumer's rights, loss of investment opportunities, slower employment and GDP growth and difficult debt repayment, thus putting stress on the present economic and social situation as well as future outlook.

"Infrastructure projects could have lowered business costs, streamlined public transportation, and boosted private investment. Project delays cause adverse effects ripple across these sectors," he added.

Also, finishing the projects on time could have encouraged investment and created employment, leading to higher production and income, and subsequently, a surge in domestic demand that draws further investment, said the economist.

The overall loss

Among these six projects, only the Padma Bridge project started commercial operations last year, delayed by around seven years, while the Karnaphuli tunnel, Khulna-Mongla port rail link, and Dohazari-Cox's Bazar rail line are waiting for inauguration later this month and next month.

When the government approved these projects, there were promises of immediate financial returns from toll collections and various other economic benefits. The six projects missed out on a potential economic benefit of Tk50,387 crore, including reduced vehicle operating costs, time savings, passenger and freight advantages, traffic diversion, fuel cost reduction, accident prevention, and pollution mitigation, according to project documents.

The initial cost for these six projects was estimated at Tk35,416 crore, but the cost has surged to Tk73,201 crore. The delay alone has incurred a direct cost of Tk37,785 crore.

The TBS analysis found missed revenue worth Tk23,757 crore stemming from such unrealised actions like toll collection, due to delays in implementing the six projects.

According to Dr Hadiuzzaman, a public transport expert and civil engineering professor at Buet, several weaknesses during the project approval phase, such as inadequate surveys, flawed designs, and incomplete estimations, make it challenging to adhere to the initial time and cost projections.

He highlighted that project costs and timelines are initially underestimated, while expected returns are overstated to secure approval. "Proceeding with projects based on flawed assumptions undermines timely completion and the realisation of benefits."

He also noted a lack of skill and dedication among the consultants, implementation officials, and contractors.

Dohazari-Cox's Bazar rail line

The construction of the railway from Chattogram's Dohazari to Cox's Bazar was initiated in 2010 for an estimated Tk1,852 crore. The proposed time for completion was three and a half years.

However, due to the delay, an additional expenditure of about Tk16,182 crore has to be incurred in the implementation of this project.

The construction of the line is almost complete, the project authorities said. Prime Minister Sheikh Hasina will inaugurate the railway service next month.

Due to the delay, the Bangladesh Railway missed out on Tk5,595 crore from transportation of passengers and goods on this line, according to the project feasibility report.

An additional Tk9,057 crore could have been saved through time and cost reductions in passenger and goods transport, fuel consumption, and environmental pollution.

Adding the cost of financial and economic benefits foregone due to the delay, the total loss of delay stands at Tk30,834 crore.

Padma Bridge

The Padma Bridge project was approved in 2007 at a cost of Tk10,162 crore. Later in 2011, the project was expanded with cost rising to Tk20,507 crore to conclude by 2015.

However, the bridge was opened for traffic last year in June 2022.

With the delay, the construction cost of the infrastructure has increased by Tk12,098 crore.

If the bridge had been commissioned in 2014, the total toll collection in the last nine years would have been Tk7,586 crore, according to a feasibility study financed by the Asian Development Bank.

Besides, the country lost an opportunity to reap economic benefits worth Tk20,731 crore in terms of savings in vehicle operating and travel time costs, project documents show.

Khulna-Mongla rail line

The project was started in 2010 to conclude by 2013 with an estimated cost of Tk1,721 crore. Delays pushed the project cost up by Tk2,539 crore.

The line is expected to be inaugurated next month, but Bangladesh Railways has yet to finalise the date for commercial operation.

The completion of the 64.75km rail link by 2015 would have generated Tk3,207 crore revenue from passengers and freight by the current fiscal year.

Moreover, the project would have saved Tk7,650 crore in economic benefits from diverted traffic, fuel cost savings, accident reduction and socio-economic improvement.

Adding all three aspects, the combined loss due to the delay is Tk13,397 crore, according to the project documents.

Dhaka-Tongi-Joydebpur railway expansion

The project started in July 2012 targeted to complete it in June 2014, within 2.5 years.

As of now, the project remains incomplete, and officials have indicated that it will not be finished until 2027– a delay of over 12 years.

The delay has escalated the project cost to Tk3,343 crore, a staggering Tk2,494 crore over the initial estimate.

Due to a delay of 12 years, Bangladesh Railway lost an opportunity to generate revenue worth Tk4,655 crore

Moreover, the project was supposed to make an economic benefit worth Tk3,943 crore per year from diverted traffic, reduced accidents, travel time and socio-economic well-being.

With this, the delay has so far caused a total of Tk11,091 crore accumulated loss from the project.

Bus Rapid Transit

The Bus Rapid Transit (BRT) project, offering a 20.5km journey in 35 minutes from the airport area to Joydebpur was approved in 2012 with an estimated cost of Tk2,040 crore to be ready by 2016.

However, the authorities have not yet determined the service launch date. The project's cost has surged to Tk4,268 crore, resulting in a direct loss of Tk2,228 crore due to cost overruns.

Analysing the project documents it was found that the BRT was supposed to generate direct revenue from passenger fares worth Tk1,175 crore in the last eight years and produce economic benefits worth Tk5,077 crore from reduced vehicle operation cost, travel time, accidents and pollution.

This adds to Tk8,481 crore of total loss incurred from the delay.

Karnaphuli tunnel

This multi-lane road tunnel under the Karnaphuli River was approved in 2011 with an estimated cost of Tk8,447 crore to start service by 2020. The cost of the project increased by Tk2,243 crore due to delay.

The infrastructure is expected to be opened this month – four years after the projected time. The delay created a loss in opportunity to collect tolls worth Tk1,539 crore, according to the project documents.

Moreover, the project was supposed to generate an economic benefit worth Tk3,929 crore as reduced travel time, accidents and transportation costs.

With this, the delay has caused an overall loss of Tk7,711 crore.