Project Completion Report
Project Number: 26451 Loan Number: 1561 November 2005
Bangladesh: Jamuna Bridge Railway Link Project
Asian Development Bank
CURRENCY EQUIVALENTS
Currency Unit – taka (Tk)
At Appraisal At Project Completion 1 August 1997 18 December 2003 Tk1.00 = $0.0229 $0.0171 $1.00 = Tk43.65 Tk58.5
ABBREVIATIONS
ADB – Asian Development Bank AEC – Asia Energy Corporation BRCE – Bangladesh Railway Corporate Entity CSC – construction supervision consultant EDC – Export Development Corporation EIRR – economic internal rate of return EMP – environment management plan FIRR – financial internal rate of return FY – fiscal year IEE – initial environmental examination JBRLP – Jamuna Bridge Railway Link Project NPV – net present value PCR – project completion report OPEC – Organization of Petroleum Exporting Countries PMU – project management unit SDR – special drawing rights SIEE – summary initial environmental examination TA – technical assistance TATA – TATA Group of Industries, India
NOTES
(i) The fiscal year (FY) of the Government ends on 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2004 ends on 30 June 2004.
(ii) In this report, "$" refers to US dollars.
CONTENTS
Page
BASIC DATA ii MAP vii I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 3 C. Project Costs 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 5 G. Conditions and Covenants 5 H. Related Technical Assistance 6 I. Consultant Recruitment and Procurement 6 J. Performance of Consultants, Contractors, and Suppliers 7 K. Performance of the Borrower and the Executing Agency 8 L. Performance of the Asian Development Bank 9 III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Efficacy in Achievement of Purpose 10 C. Efficiency in Achievement of Outputs and Purpose 10 D. Preliminary Assessment of Sustainability 11 E. Environmental, Sociocultural, and Other Impacts 12 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 12 A. Overall Assessment 12 B. Lessons Learned 12 C. Recommendations 14 APPENDIXES 1. Project Logical Framework 16 2. Summary of Appraisal and Actual Project Costs 21 3. Annual Loan Disbursements 22 4. Project Implementation Schedule 23 5. Status of Compliance with Loan Covenants 25 6. Traffic Forecasts 31 7. Economic and Financial Reevaluation 35 8. Financial Performance 41
BASIC DATA
A. Loan Identification
1. Country Bangladesh 2. Loan Number 1561-BAN (SF) 3. Project Title Jamuna Bridge Railway Link Project 4. Borrower People’s Republic of Bangladesh 5. Executing Agency Bangladesh Railway 6. Amount of Loan SDR80.67 million 7. Project Completion Report Number BAN 26451
B. Loan Data 1. Appraisal – Date Started 19 April 1997 – Date Completed 3 May 1997
2. Loan Negotiations – Date Started 1 September 1997 – Date Completed 3 September 1997
3. Date of Board Approval 2 October 1997
4. Date of Loan Agreement 19 January 1998
5. Date of Loan Effectiveness – In Loan Agreement 19 April 1998 – Actual 6 March 1998 – Number of Extensions None
6. Closing Date – In Loan Agreement 31 December 2001 – Actual 18 December 2003 – Number of Extensions Two
7. Terms of Loan – Interest Rate 1% per annum – Maturity (number of years) 40 – Grace Period (number of years) 10
8. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval
30 March 1998 17 December 2003 68.5 months
Effective Date Original Closing Date Time Interval
6 March 1998 31 December 2001 46.0 months
iii
b. Amount ($ million) Last Net Original Revised Amount Amount Amount Undisbursed Category Allocation Allocation Canceleda Available Disbursed Balance Civil Works: 1A 58.290 61.660 61.660 61.660 0.000 1B 30.310 27.537 27.537 27.123 0.414 Consulting 12.100 13.464 13.464 13.527 (0.063) Services Prior TA 0.832 0.832 0.832 0.000 Financing Service 4.299 2.797 2.797 2.797 0.000 Charge Unallocated 5.000
Total 110.00 106.290 106.290 105.939 0.351 TA = technical assistance.
9. Local Costs (Financed) - Amount ($ million) 2.66 - Percent of Local Costs 1.76 - Percent of Total Cost 0.73
C. Project Data
1. Project Cost ($ million)
Cost Appraisal Estimate Actual Foreign Exchange Cost 93.5 213.91 Local Currency Cost 175.5 151.09 Total 269.0 365.00
2. Financing Plan ($ million)
Appraisal Estimate Actual Cost Foreign Local Total Foreign Local Total Implementation Costs Borrower Financed 0.0 117.6 117.6 81.71 148.48 230.19 Asian Development Bank Financed 63.5 46.5 110.0 103.28 2.66 105.94 Export Development Corp., Canada 7.0 0.0 7.0 0.0 0.0 0.0 France 7.0 1.0 8.0 7.00 0.0 7.00 OPEC Fund for International 6.0 9.0 15.0 14.91 0.0 14.91 Development Spain (Telecom) 10.0 1.4 11.4 6.96 0.0 6.96 Total 93.5 175.5 269.0 213.91 151.09 365.00
OPEC = Organization of Petroleum Exporting Countries.
a On 18 December 2003, an amount of $351,000 was cancelled. iv
Actual Component Appraisal Total Foreign Local
A. Base Cost 1. Right-of-Way (including resettlement) 17.6 20.40 0.0 20.40 2. Civil Works: Railway Line 155.8 293.67 173.62 120.05 3. Signaling and Telecommunications 20.8 14. 85 14.13 0.72 4. Consulting Services 12.1 16.83 11.34 5.49 5. Project Administration 1.1 1.70 0.0 1.70 6. Staff Retrenchment 24.0 0.0 0.0 0.0 B. Contingencies 1. Physical 16.7 0.0 0.0 0.0 2. Price Escalation 16.6 14.75a 12.02a 2.73a Subtotal (A+B) 264.7 362.20 211.11 151.09 C. Service Charge 4.3 2.80 2.80 0.0 Total 269.0 365.00 213.91 151.09 a. $1 = Tk48.25.
4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants 30 October 1997 25 November 1997 Completion of Engineering Designs June1997 June1997 Civil Works Contracts — — A. Contract 1 (Joydebpur–Jamtoil) 1. Civil Works: Signing of Contract 4 November 1997 4 December 1997 Date of Award (LOI) 30 September 1997 30 October 1997 Completion of Work 4 May 2001 20 December 2003 2. Signaling Subcontract: Signing of Contract 4 November 1997 28 September 1999 Date of Award (LOI) 30 September 1997 1 September 1999 Completion of Work 4 May 2001 31 January 2004 3. Telecommunications Subcontract: Signing of Contract 4 November 1997 14 April 2000 Date of Award (LOI) 30 September 1997 1 September 1999 Completion of Work 4 May 2001 30 October 2003 B. Contract 2: (Jamtoil–Parbatipur) Signing of Contract 05 March 1998 16 November 1999 Date of Award (LOI) 31 January 1998 19 October 1999 Completion of Work 05 July 2000 20 December 2003 Equipment and Supplies
First Procurement — — Last Procurement — — Completion of Equipment Installation — — Start of Operations Completion of Tests and Commissioning — 6 March 2004 Beginning of Start-Up — 7 March 2004 LOI = Letter of Intent
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5. Project Performance Report Ratings Ratings
Implementation Period Development Objectives Implementation Progress From 6 March 1998 to 31 December 1999 Satisfactory Highly Satisfactory From January 2000 to December 2002 Satisfactory Satisfactory From January 2003 to January 2004 Satisfactory Satisfactory
D. Data on Asian Development Bank Missions No. of No. of Person- Specialization Name of Mission Date Persons Days of Members Fact-Finding Mission 11 May–23 May 1996 5 45 a, b, c, d, g Follow-Up Fact-Finding Mission 8 Jul–15 Jul 1996 2 16 a, h Appraisal Mission 19 Apr–3 May 1997 6 90 a, b, c, d, e, f Loan Review Mission 1 31 Jan–4 Feb 1998 2 10 a, h Loan Review Mission 2 24 Nov–8 Dec 1998 2 30 k, h Loan Review Mission 3 24 May–3 Jun 1999 1 10 a Loan Review Mission 4 26 Sep–3 Oct 1999 3 24 a, h, j Loan Review Mission 5 30 Jan–5 Feb 2000 1 7 a Loan Review Mission 6 30 Nov–5 Dec 2000 2 12 a, k Loan Review Mission 7 13 Mar–28 Mar 2001 3 48 a, k, i Loan Review Mission 8 15 Oct–22 Oct 2001 2 16 k, i Project Review Mission 1 7 Apr–15 Apr 2002 2 18 I, l Project Review Mission 2 15 Dec–31 Dec 2002 1 17 I Ct Review Mission 3 24 Aug–31 Aug 2003 2 16 h, i Project Completion Review Mission a 29 Aug–1 Sep 2005 4 24 f, i, l a - project engineer and mission leader, b - senior project economist, c - senior program officer, d - senior social specialist, e - counsel, f - staff consultant, g - environment specialist, h - professional staff, i - project implementation officer, j - resident representative, k - senior project implementation officer, and l - support staff. a. The project completion report was prepared by A. Faruque, project implementation officer and M. N. Islam, project analyst, Bangladesh Resident Mission.
89o 00'E 91o 45'E
Panchagarh B A N G L A D E S H JAMUNA BRIDGE RAILWAY LINK PROJECT
Thakurgaon Mogathat (as completed) Nilphamari
Lalmonirhat Saidpur Rangpur T Kurigram e Birol Parbatipur e s t a N Madyapara R Dinajpur . o Barapukaria Ramnabazar 25 30'N 0 25 50 75 25 o 30'N Phulbari Gaibandha Kilometers
Pulchari Ghat Bahadurabad Ghat Joypurhat Jarianjail Sunamganj Chhatak Sherpur B Netrokona Mahadebpur Jm r a ahmaput ra R Sylhet u . n Shamganj S Y L H E T a Jamalpur Gouripur Naogaon Bogra R Mohanganj iyara R. . Kush Mymensingh Nawabganj Jagannathganj Ghat R A J S H A H I Kulaura Sirajganj Moulvibazar Natore Ibrahimabad Ga Rajshahi ng Jamtoil Kishoreganj Habiganj es R . Abdulpur Tangail Ishurdi D H A K A
Pabna Gazipur Ashuganj INDIA Bheramara Tongi Manikganj Joydebpur Brahmanbaria INDIA Poradha Kushtia Narsingdi Akhaura Paturia Meherpur Kalukhali Rajbari DHAKA Narayanganj Chuadanga Goalandia Ghat Jhenaidah Pa Narayanganj dm Faridpur a R Darsana . Munshiganj Magura Comilla Mobarakganj Chandpur Belonia Jessore Madaripur Shariatpur Laksham Bhatiapara Ghat Narail M eg h Benapole n Lakshmipur Gopalganj a R Feni K H U L N A . Khagrachari Noakhali Barisal Nazirhat Khulna Jhalakati Bhola Rangamati Bagerhat Pirojpur Satkhira C H I T T A G O N G .
R . r R u la s a s h Shlashahar u g
P n i Chittagong r Patuakhali
a Dohazari H
Barguna Bandarban 22o 00'N 22o 00'N
B a y o f B e n g a l
Dhaka Metropolitan Area Existing Broad Gauge Network
National Capital Jamuna Bridge Cox's Bazar
District Capital New Line, Dual Gauge
City/Town Conversion of Existing Line, Broad Gauge to Dual Gauge
River Divisional Boundary M Y A N M A R
Existing Meter Gauge Network International Boundary
Boundaries are not necessarily authoritative.
89o 00'E 91o 45'E
05-5279 RM
I. PROJECT DESCRIPTION
1. In 1994, the Government of Bangladesh launched the Jamuna Multipurpose Bridge Project1 with financial assistance from a consortium of donor agencies, the Asian Development Bank (ADB), the World Bank, and the Overseas Economic Cooperation Fund2. The objective of the Project was to establish an efficient and reliable multimodal transport link across the Jamuna River to connect Bangladesh’s less developed northwestern region with its more developed eastern region. The Project did not initially include the construction of the railway lines necessary to link Jamuna Bridge with the existing railway network. The Jamuna Bridge Railway Link Project (JBRLP) was later formulated as an integral part of the ongoing Januma Multipurpose Bridge Project. Both the Government and ADB recognized that the benefits of Jamuna Bridge could be maximized from the onset if both road and rail connections were completed expeditiously and coincided with the opening of the bridge. The need for both modes of transport was established on the basis of multimodal analysis, which demonstrated that the two modes were complementary. With the projected increase in passenger and freight traffic, the Project was also considered vital for the timely financial recovery of Bangladesh Railway.
2. The main purpose of the JBRLP was to support accelerated economic growth in the less developed northwestern region of Bangladesh. This was to be achieved by providing a railway link across Jamuna Bridge, thereby connecting by rail the agricultural areas in the northwest with the commercial center of Dhaka and the country’s primary port of Chittagong, both located east of the Jamuna River. The Project’s objectives3 were to (i) remove the critical rail bottleneck at the Jamuna River ferry crossing; (ii) optimize the use of Jamuna Bridge; (iii) integrate, rationalize, and improve the railway system by connecting the western and eastern railway networks and unifying the two different gauges4; (iv) promote continued restructuring and institutional reforms in Bangladesh Railway by commercializing operations and implementing market-oriented policies; (v) contribute to the physical and economic integration of the less developed northwestern region with the more developed eastern part of the country; and (vi) improve opportunities for subregional rail traffic between Bangladesh, India, and Nepal.
3. The Project comprised two physical components: (i) contract 1 to construct 99 kilometers (km) of a new dual-gauge5 railway line east of the Jamuna River from Joydebpur to Jamtoil to connect to the existing network west of the river, including 5 km of track on Jamuna Bridge and 9 km of track west of the river; and (ii) contract 2 to convert 245 km of the existing broad-gauge track from Jamtoil to Parbatipur in northwest Bangladesh to dual-gauge track so that it could also handle meter-gauge traffic (see the map). The project scope also included implementation of the Railway Reform Program, which consisted of (i) converting Bangladesh Railway into a corporate entity, and (ii) reducing the staff of Bangladesh Railway from 40,000 to 30,000 by June 2003. The Project also included a special program for retrenching of further 6,500 Bangladesh Railway staff. Under this program, 3,000 employees were to be let go from FY1998 to FY2002 through natural attrition and another 3,500 employees were to be let go through a
1 ADB. 1994. Jamuna Bridge. Manila 2 Now the Japan Bank for International Cooperation. 3 ADB. 1997. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of Bangladesh for the Jamuna Bridge Railway Link Project. Manila. 4 Prior to the JBRLP, the railway network was characterized by broad-gauge and meter-gauge tracks. Meter gauge accounted for about two-thirds of the total network and was the only gauge found east of the Jamuna River. Track west of the Jamuna River consisted of a mix of both gauges. 5 Dual gauge involves the installation of a third rail that allows both broad-gauge and meter-gauge operations on the same track. 2 buyout scheme. This staff reduction program was to be followed by another reduction of 3,500 staff following the cessation of ferry operations.
4. The actual cost of the Project on completion, inclusive of taxes, duties, interest, and other charges during implementation, was $365 million equivalent, comprising foreign exchange costs of $213.91 million and local currency costs of $151.09 million equivalent. The Project appraisal was carried out in April 1997, and ADB approved the loan in October 1997.
II. EVALUATION OF DESIGN AND IMPLEMENTATION
A. Relevance of Design and Formulation
5. The Project was designed in conformity with ADB’s operational strategy to reduce poverty in Bangladesh by (i) accelerating economic growth through, among other things, improved physical infrastructure; (ii) helping the poor improve their living conditions; and (iii) improving and protecting the environment. The Project aimed at supporting growth by removing major bottlenecks in the railway infrastructure caused by the need for ferrying traffic across the Jamuna River and for trans-shipment between differently gauged tracks. The Project provided an opportunity for seamless, economical, and environment-friendly rail operations between the northwestern and eastern regions of the country. It also opened up prospects for using rail for transporting long-haul bulk cargo and intercity passenger traffic, for which it is ideally suited. The Project was therefore fully consistent with ADB’s country strategy and program.
6. Under the Government’s Fifth Five-Year Plan (1997–2002), the main objective for the transport sector was to develop a balanced and integrated transport network, bearing in mind the target of achieving an average gross domestic product growth rate of 7.0% per year and the projected growth of 7.5% per year in the transport sector. The sector strategy was formulated in light of the increasing volume of domestic traffic as well as future traffic from the Asian Highway and the Trans-Asian Railway. For the rail subsector, the need to link the eastern and western zone networks was identified by the Government, which was consistent with the planned achievement of deficit-free operations by Bangladesh Railway as envisaged in the Railway Recovery Program.6 The Project was therefore highly relevant to the Government’s sector strategy.
7. The project design took into consideration lessons learned from previous ADB-financed project, and current ADB practices. The lessons indicated the need to (i) address institutional weaknesses; (ii) strengthen project management to reduce the risk of delays and to support timely implementation; (iii) improve selection and prequalification criteria for contractors to ensure adequate quality and better performance; (iv) limit administrative complexity, inefficiency, and delays by careful selection of medium to large procurement packages; and (v) submit regular monthly progress reports during project implementation, including key operational and financial indicators.
8. Deviations in the Project design from that planned at appraisal included the use of prestressed concrete sleepers instead of wooden sleepers as in the original engineering design. The construction supervision consultant (CSC) determined that significant benefits in terms of
6 ADB. 1994. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of Bangladesh for the Railway Recovery Program. Manila, (Loan 1310-BAN, approved in September 1994, for $80.0 million.) 3 improved track geometry would accrue if such sleepers were used. The CSC noted that the financial benefit resulting from the longer life of concrete sleepers would substantially offset the cost increase. ADB accepted the proposal subject to the Government financing the additional cost. In a second deviation, the track design for contract 2 bypassed the station in Ishurdi to avoid operational bottlenecks. As a result, the length of dual-gauge track was reduced from 250 km to 245 km. These changes did not affect the time schedules, expected benefits, or any other measures of efficiency.
9. Institutional reform and restructuring of Bangladesh Railway and establishment of a Project Management Unit (PMU) supported by the CSCs were covenanted in the Loan Agreement. Prequalification criteria for contractors were properly formulated, leading to the selection of experienced and capable contractors. Contract packages were kept large except where the cofinancing arrangement did not permit this. ADB and Bangladesh Railway carried out regular project monitoring through the CSCs’ progress reports and ADB’s project review missions. The CSCs’ interventions were timely and adequate when difficulties arose during project implementation. The project design is shown in Appendix 1.
B. Project Outputs
10. The project outputs envisaged during appraisal were (i) the construction of 99 km of dual-gauge railway line from Joydebpur to Jamtoil to connect Bangladesh Railways’ eastern and western networks, including 5 km of track on Jamuna Bridge; (ii) the conversion of 245 km of existing broad-gauge track to dual-gauge track from Jamtoil to Parbatipur in northwest Bangladesh to connect to the meter-gauge network there; (iii) the provision of signaling equipment for component i; (iv) the provision of telecommunications equipment for component i; (v) the provision of rails for components i and ii; (vi) the retrenchment of 3,500 staff through a staff separation scheme that provided for compensation, retraining, and skills development for retrenched staff.
11. All project outputs except component vi, were fully achieved, albeit with cost and time overruns. The special staff separation scheme was postponed following a request from Bangladesh Railway based on higher than expected natural attrition and a forthcoming manpower analysis to be carried out under the ongoing ADB-assisted study on Organizational Reform of Bangladesh Railway, Phase III7 to avoid the loss of essential skilled personnel.
C. Project Costs
12. At appraisal, the cost of the Project was estimated at $269 million equivalent. This comprised a foreign exchange component of $93.5 million (34.8%) and a local currency component of $175.5 million equivalent (65.2%). The Project experienced a cost overrun, and the final cost at the time of completion was $365 million equivalent. The total increase in project costs was $96 million equivalent (35.7%) over the original appraisal estimate. The foreign exchange component increased by 128.8% to $213.91 million, whereas the local currency component was $151.09 million equivalent (14% less than the appraisal estimate). Details of estimated and actual Project costs are given in Appendix 2.
13. The cost overrun was attributed to (i) higher than estimated bid prices (contract 1 was awarded at a price $22 million higher than anticipated), (ii) underestimation during the feasibility
7 ADB. 2000. Technical assistance to the People’s Republic of Bangladesh for Organizational reform of Bangladesh Railway, Phase-III. Manila. TA 3491-BAN, approved on 29 August 2000, for $840,000. 4 study of the extent of works needed to convert the western zone broad-gauge tracks to dual- gauge tracks under contract 2, (iii) additional requirements for ballast and rail associated with contract 2 because of the poor condition of existing track materials, (iv) additional input of consulting services because of an extension of the project implementation period, (v) changes in contract 1 necessitated by the use prestressed concrete sleepers instead of wooden sleepers, (vi) start-up delays in implementing both contracts, and (vii) increased duties and taxes associated with both contracts, and the settlement of contractors’ eligible claims.
14. The Project was financed by ADB for Special Drawing Rights (SDR) 80.67 million ($110.0 million equivalent) with cofinancing from a number of donors. Of the total project cost of $365 million on completion, ADB provided a loan of $105.9 million from its Special Funds resources (29% of the project cost). Cofinancing partners included the Organization of Petroleum Exporting Countries (OPEC) Fund for civil works and track construction ($14.91 million), the Government of France for the signaling subcomponent ($7 million), and the Government of Spain for the telecommunications subcomponent ($6.96 million). Commercial cofinancing by the Export Development Corporation (EDC) of Canada for $7.0 million (tied loan) was written off because of the unavailability of an eligible manufacturer in Canada for procuring “employer-supplied rails” for the Project. Counterpart funding by the Borrower, the Government of Bangladesh, was $230.19 million. ADB administered the OPEC component, while the respective governments administered the French and Spanish loans, which were used to finance nominated subcontracts. The loan was declared effective on 6 March 1998. The original loan closing date was 31 December 2001, which was extended to 18 December 2003.
D. Disbursements
15. Annual disbursements from the ADB loan are shown in Appendix 3. Total disbursements under the loan amounted to $105.94 million, or 99.67% of the loan amount ($106.29 million). Of this, the foreign and local currency amounts disbursed were $103.28 million (97.5%) and $2.66million (2.5%), respectively, compared with appraisal estimates of 57.7% and 42.3%, respectively. The proportion of foreign currency disbursement was substantially higher than the provision in the Loan Agreement. ADB loan proceeds were reallocated because of the cost overrun (see paras. 12 and 13), in particular, to fund the need for additional consultants’ inputs to cover the time overruns. This led to the reduction in local currency funding.
16. The initial and final disbursements under the loan were made on 30 March 1998 and 17 December 2003, respectively. This was equivalent to a disbursement period of 68 months and 15 days, compared with the 46 months envisaged at appraisal.
E. Project Schedule
17. At appraisal, it was estimated that the Project would be completed in 46 months, with civil works construction starting at the end of 1997 and completed by March 2001. However, the Project took longer to implement, and both contracts, including the subcomponents, were substantially completed within the extended loan period of August 2003. The Project was finally completed in January 2004. The implementation schedule of the Project at appraisal and the actual implementation schedule are given in Appendix 4.
18. Major delays in contract 1 were caused by the contractor’s inability to make use of the construction season effectively during the first year of implementation, the poor planning of site activity, the cancellation of rail procurement from the selected Canadian manufacturer, the delay in effectiveness of the Spanish loan for the telecommunications subcomponent, and the slow 5 performance of the French contractor in installing the signaling equipment. As concerns contract 2, initial delays were caused by Bangladesh Railway’s delay in awarding the contract. Later, the contractor’s own organizational and logistical problems, namely, delays in completing site facilities and submitting requests for approval of materials and work methods, largely prevented the contractor from achieving production targets. The progress of work was also impeded by an interruption in the supply of prestressed concrete sleepers that caused the Plasser quick relay system for track renewal to stop frequently, the recurrence of logistical problems relating to the supply of ballast to the site, and a lack of coordination of site activities that prevented track renewal works from proceeding smoothly and efficiently.
F. Implementation Arrangements
19. The implementation arrangements envisaged at appraisal were followed. Bangladesh Railway was the executing agency for the Project. The PMU set up by Bangladesh Railway in 1995 for preparatory work under TA 2235-BAN8 was assigned responsibility for overall project implementation. Bangladesh Railway’s general manager for the JBRLP headed the PMU. The day-to-day management and supervision of the Project was assigned to the project manager of the CSCs. The project manager reported to the project director, who in turn, reported to the general manager. The arrangements worked well.
G. Conditions and Covenants
20. The conditions of effectiveness of the loan were fulfilled as scheduled and the loan was declared effective on 6 March 1998, well ahead of the stipulated date of 19 April 1998. The covenants were generally relevant.
21. Covenants specific to project implementation, such as setting up a PMU, signing cofinancing agreements, arranging for land acquisition and resettlement, and implementing mitigating measures to minimize environmental impacts, were complied with on time. However, covenants related to manpower reduction and the achievement of working and operating ratios less than 1.0 were unrealistic, because the appraisal mission overestimated Bangladesh Railway’s capabilities and the prospects for achieving these targets. These covenants may have been influenced by the optimism generated by the successful implementation of the ADB- assisted Railway Recovery Program.
22. The loan covenants have generally been complied with, except for (i) the establishment of Bangladesh Railway Corporate Entity (BRCE), and (ii) special staff separation scheme due to follow the shutting down of ferry operations. ADB and Bangladesh Railway later agreed that a manpower analysis would be carried out before adopting a selective voluntary staff separation scheme to avoid losses of essential skilled personnel. The terms of reference for ADB’s ongoing TA 3491-BAN (see footnote 7) include such an analysis. Given that the staff reduction scheme had been preceded by a massive reduction of 17,000 staff under the Railway Recovery Program, this decision is considered appropriate.
23. Bangladesh Railway maintained a working ratio of less than 1.0 up to FY1998–1999, after which it started rising. Jamuna Bridge opened to road traffic in June 1998, which was before the physical completion of the JBRLP in December 2003. During this 5.5-year period, the diversion of traffic from rail to road resulted in losses to Bangladesh Railway. Following the
8 ADB. 1994. Technical assistance to the People’s Republic of Bangladesh for the Preparation of the Fourth Railway Project. Manila. TA 2235-BAN, approved on 13 December 1994, for $594,000. 6 implementation of the Railway Recovery Program, Bangladesh Railway’s scope for reducing its expenditures became limited, and in addition, it had to fund pay increases for its employees mandated by the Government. As a result, maintaining financial ratios below 1.0 was no longer a realistic proposition.
24. The covenants regarding the restructuring of Bangladesh Railway in order to establish the BRCE remain to be complied with. In relation to establishing BRCE, the Government prepared and examined a number of draft statutes, but did not pursue them further. Proper sequencing and a step-by-step approach, including preparatory work and the restructuring of Bangladesh Railway into lines of business as a first step, are needed before establishing BRCE, and this will take more than 2 years.9
25. The covenants relating to rolling stock have only been partly complied with. Even though some container and tank wagons have been procured, uncertainties exist with respect to the procurement of hopper wagons, which are urgently needed for transporting hard rock from the Madhyapara mine and coal from the Barapukuria mine (see the map). Both the mines are likely to start operations soon. The refitting of old wagons with a braking system has been significantly delayed.
26. Bangladesh Railway regularly submitted monthly progress reports to ADB, and ADB carried out regular project and loan review missions. The status of compliance with the loan covenants is presented in Appendix 5.
H. Related Technical Assistance
27. No technical assistance (TA) was provided under the loan, but a number of sectoral TAs were provided separately.10 In December 1994, ADB approved a project preparatory TA11 for the feasibility study for the Project. In April 1996, supplementary project preparatory TA12 was approved for detailed engineering to expedite project preparation. To maximize the use of Jamuna Bridge, ADB approved a small-scale TA13 in December 1996 to determine the maximum permissible loading for train configurations to be operated on the bridge.
I. Consultant Recruitment and Procurement
28. At appraisal, it was envisaged that about 300 person-months of international and 450 person-months of domestic consulting services would be required in the fields of railway construction management, railway engineering, bridge construction, materials and quality control, and benefit monitoring and evaluation. Following the option provided in the Loan Agreement, Bangladesh Railway successfully negotiated a contract for such consulting services on a direct selection basis with Canarail (Canada)-SYSTRA (France): Bangladesh Consultants, Ltd.-and Technoconsult, Ltd. (Bangladesh), which had been engaged to prepare the designs
9 Aide Memoire of ADB and World Bank Joint Mission (3–13 July 2005) for Bangladesh Railway Sector Development Program. 10 ADB. TA 1819-BAN: Organizational Reform of Bangladesh Railway, for $1.5 million, December 1992; TA 2230- BAN: Monitoring Railway Recovery Program, for $100,000, December 1994; TA 2544-BAN: Organizational Reform of Bangladesh Railway, Phase II, for $1.0 million, March 1996. Manila. 11 ADB. 1994. Technical assistance to the People’s Republic of Bangladesh for the Preparation of the Fourth Railway Project. Manila. TA 2235-BAN, approved on 13 December 1994, for $594,000. 12 TA 2235-BAN: Fourth Railway Project (supplementary), for $500,000, April 1996. The PPTA was cofinanced by the Canadian International Development Agency, the Direction des Relations Economiques of France, and the Government of Bangladesh. 13 ADB. 1996. TA 2725-BAN: Jamuna Bridge Train Configurations, approved on 19 December 1996, for $100,000. 7 and bidding documents for the Project. This was considered necessary for the sake of continuity, efficiency, economy, and speed and was consistent with ADB’s Guidelines on the Use of Consultants. Design on a fast-track basis and the need to meet bridge opening day14 activities were other reasons for sole sourcing. With ADB’s approval, the consultants’ inputs were increased to 590 person-months of international and 1,946 person-months of domestic consulting services, mainly to support and supervise the civil works, which were delayed by about 20 months compared with what had been envisaged at appraisal.
29. Difficulties faced by contract 1 with respect to contract packaging and the preparation of bidding documents were due to the financing arrangement whereby signaling and telecommunication works were to be carried out under tied French and Spanish government funding following the countries’ respective procurement procedures. This was resolved by selecting nominated subcontractors from the respective countries. Contract 2, however, included signaling and telecommunications as an integral part of the contract.
30. Civil works for the two main contracts were procured through international competitive bidding, following ADB’s Guidelines for Procurement under Asian Development Bank Loans. The selected contractors were Samwhan-Travaux du Sud (TSO) Joint Venture (France and Republic of Korea) for contract 1 and Indian Railway Construction Company for contract 2. The nominated subcontractor for the signaling subcontract under contract 1 was selected by inviting bids limited to four French companies shortlisted by the French Government. The contract was awarded to the lowest responsive bidder, ALSTOM of France. Similarly, bids were invited for the telecommunications subcontract from a shortlist of Spanish companies provided by the Spanish Government. The contract was awarded to Alcatel S.A. of Spain.
31. The Project originally envisaged commercial cofinancing by EDC for the purchase of rails for work to be done under contracts 1 and 2, but the supplier nominated by EDC was later found not to be in a position to supply the rails. The procurement of rails was then made partly using suppliers’ credit and partly with funds from the Government’s resources. The delay in the procurement of rail presented a serious threat to the progress of the main civil works contracts and contributed to the delays in implementing the Project. It was mitigated to some extent by borrowing rails procured for other Bangladesh Railway projects.
J. Performance of Consultants, Contractors, and Suppliers
32. The overall performance of the construction supervision consultant (CSC) was highly satisfactory. In particular, the consultants performed exceptionally well by intervening in a timely fashion and continuously providing adequate guidance to the contractors, especially in relation to resolving critical issues that would otherwise have caused further delays in project implementation. For instance, when a substantial (about 70%) backlog in the implementation progress of embankment work under contract 1 occurred during the first year (1998–1999), the consultants were instrumental in substantially reducing the delay by getting the contractor to agree to accelerate the rate of progress by mobilizing additional equipment and supervision personnel. Similarly, when the Spanish loan for the telecommunications subcontract took an abnormally long time to be effective, the consultants mobilized their local and expatriate telecommunication engineers and persuaded the nominated subcontractor to start system design work and to manufacture optic fiber cables before the Spanish Government loan was effective. The CSC convinced the signaling subcontractor to replace both the poorly performing project management team and the field team. The CSC also helped the contract 2 contractor to
14 The Government decided that the bridge would have railway track on it on the day it opened, 23 June 1998. 8 plan its work when a lack of planning and coordination on the contractor’s part came to light. Quality assurance by the consultants was also satisfactory, as demonstrated by the high riding quality of the track constructed under the Project.
33. The overall performance of the contract 1 contractor was reasonably good, though at times erratic. As mentioned earlier, the progress of work was slower than expected during the first working season, but later the contractor took the necessary steps to adequately accelerate progress. The contractor’s inadequate planning for site activity led to the suspension of track installation work for 4 months due to the inability to finish the backfilling of Bridge No. 50 before the arrival of the 2001 monsoons. However, this was subsequently resolved through timely intervention by the CSCs and accelerated activity by the contractor.
34. The telecommunications subcontractors performed exceptionally well. They started the system design and manufacture of optic fiber cables before the Spanish Government’s loan, which was significantly delayed, became effective. The subcontractor continued to diligently carry out the work after loan effectiveness with an even higher degree of discipline and organization. By contrast, the signaling subcontractors performed poorly for a considerable period following loan effectiveness, until they were persuaded to replace their project management and field teams. As a result, their performance improved substantially.
35. The performance of the contract 2 contractors was not entirely satisfactory. At times they failed to reach their production targets because of poor organizational capabilities and logistical problems. With timely intervention by the CSC and with their assistance, they did, however, achieve optimum progress in track laying within the allocated time frame.
K. Performance of the Borrower and the Executing Agency
36. To ensure early implementation of the Project and to establish the railway link over Jamuna Bridge within the shortest possible time after following bridge construction, the Borrower and Bangladesh Railway took all necessary actions in a timely manner. The conditions of loan effectiveness were complied with expeditiously, and the loan became effective well ahead of the stipulated time. The PMU was established on time, as was the appointment of the CSCs. Taking full advantage of ADB’s approval of advance procurement action and retroactive financing, all preparatory activities relating to the award of contract 1 were carried out quickly, and the contract was signed in December 1997, 3 months before loan effectiveness. By that time, the land required for starting the physical works had been acquired with Government funding. The taking over of the land was smooth, which ensured timely handing over of the site to the contractors. The Government was the leading funding partner of the Project, as envisaged at appraisal, and also bore the entire amount of about $100 million in cost overruns.
37. The areas where the Borrower’s performance was not up to expectations were the institutional reform of Bangladesh Railway, and the funding for acquiring specialized wagons for transporting hard rock and coal from mines in the project area. Such actions were vitally important for reaping the benefits of the Project. Bangladesh Railway could not complete the Joydebpur–Dhaka dual-gauge link in a timely fashion and equip a sufficient number of wagons with a braking system for freight train operations, which were needed immediately after completion of the Project. Necessary arrangements for transporting Indian freight traffic over the bridge to Dhaka and other eastern zone destinations were also not in place.
9
38. In relation to Bangladesh Railway’s institutional capacity, it has some strength as well as weaknesses. Bangladesh Railway demonstrated its strengths in relation to the preparatory work relating to the Project, which included meeting the covenants for loan effectiveness, acquiring land in a timely fashion, and managing project implementation efficiently. However, Bangladesh Railway was not fully prepared to handle the level of traffic expected after project completion. In addition, it could have been more proactive in dealing with major clients and developing a closer relationship with them to remain informed about their transportation needs and make decisions about its operational strategy accordingly.
39. The assessment of Bangladesh Railway’s capabilities at appraisal was reasonably accurate. The study under advisory TA 3491-BAN (see footnote 7) was launched to recommend institutional restructuring measures needed to further enhance Bangladesh Railway’s management capability. The study is still ongoing.
40. The performance of Bangladesh Railway is rated as partly satisfactory.
L. Performance of the Asian Development Bank
41. ADB, as the lead donor, played a commendable role in accelerating approval of the loan and project implementation. In April 1996, ADB approved project preparatory TA. 2235-BAN (see footnote 8 and 12) for detailed engineering to expedite project preparation. ADB also agreed to the retention of the consultants appointed under this TA, on a sole source basis, as CSCs to maintain continuity, efficiency, and speed. ADB further promoted expeditious implementation of the Project by approving advance procurement action and retroactive financing. ADB fielded regular loan and project review missions, which resulted in good interaction between representatives of ADB and Bangladesh Railway, the consultants, and the contractors. No disagreements arose with the Borrower or Bangladesh Railway in relation to terms of reference, bid documents, award of contracts, or any other matters relating to project implementation.
42. Through its review missions, ADB regularly monitored the performance of the Borrower and Bangladesh Railway. The missions expressed concern about the deteriorating financial performance of Bangladesh Railway, the delays in complying with some of the loan covenants, and the slippage in maintaining implementation schedules and advised Bangladesh Railway to take mitigating measures. The missions also advised Bangladesh Railway to start preparing for train operations over Jamuna Bridge, in particular, by procuring rolling stock for freight traffic, and to complete the Joydebpur-Dhaka dual-gauge project expeditiously. Overall, ADB’s performance in relation to project implementation was highly satisfactory.
III. EVALUATION OF PERFORMANCE
A. Relevance
43. The Project design was consistent with ADB’s operational strategy for Bangladesh and the Government’s main objectives for the transport sector as outlined in the Fifth Five-Year Plan. The design continued to be relevant throughout the implementation period and was not substantially changed during loan review or at any other point.
10
B. Efficacy in Achievement of Purpose
44. The immediate objective of integrating the railway networks of the eastern and western zones has been achieved. The benefits envisaged at appraisal were expected to be derived from freight operations, which have not yet started; however, Bangladesh Railway is earning some additional revenue from trans-Jamuna passenger trains. Bangladesh Railway started operating broad-gauge passenger trains from Rajshahi and Khulna to Joydebpur in August 2003. Since then the number of trans-Jamuna passengers increased from an average of 64,000 to 225,000 in FY2003 to 285,000 in FY2004.15 Meter-gauge passenger trains from Lalmonirhat and Dinajpur to Dhaka began operating during March–July 2004. The benefits from these passenger services will be reflected in Bangladesh Railway’s Information Book 2005, which has yet to be published.
45. The Project is likely to contribute to the goal of overall economic development given that it has already begun to stimulate growth in the industry, agriculture, and mining sectors, especially in the northwest region of the country. Examples of such development are the proposed large projects by private sector entities.16 It has also started to enhance mobility for long-haul passengers by providing safe and affordable transportation.
C. Efficiency in Achievement of Outputs and Purpose
1. Economic Performance
46. An economic reevaluation of the Project was undertaken to assess the efficiency of the investment. The methodology adopted at appraisal was followed: comparing with project and without project situations. The assumptions used at appraisal were examined and modified as necessary to reflect actual projects and projects in the pipeline. The evaluation used the actual costs and implementation schedule as the basis for deriving the economic costs and their annual distribution. All costs and benefits were expressed in 2004 constant prices. The main differences between reevaluation and appraisal arose because of (i) the higher economic costs derived from actual costs; (ii) the longer construction period caused by delays in implementation; (iii) the lower than forecast freight traffic caused by delays in operating freight trains across Jamuna Bridge; and (iv) the inclusion of the proposed large mining, industry, and power generation projects by foreign private sector investors. The revised traffic forecasts are presented in Appendix 6.
47. The table summarizes economic performance as measured by the Project’s economic internal rate of return and compares it with that estimated at appraisal. It was calculated for two scenarios: scenario 1, which was the situation at appraisal; and scenario 2, which includes new traffic expected to be generated by private sector investments. The reduction in the economic internal rate of return in scenario 1 was caused by the increase in construction costs, the extended implementation period, the reduced traffic forecasts, and the devaluation of the local currency. However, scenario 2, which is more relevant at the present time, was found to be viable. Sensitivity tests ascertained the robustness of the Project. Even though both scenarios were found to be viable in the base case, only scenario 2 remained economically viable under all sensitivity cases. Scenario 2 could withstand a 16% fall in forecast traffic, while scenario 1
15 Source: Bangladesh Railway’s Information Book 2004. 16 Coal mining by the Asia Energy Corporation, Australia, and a steel plant and coal mining by TATA Group of Industries, India. 11 could not absorb even a 10% drop in traffic. The details of economic reevaluation are described in Appendix 7.
Economic Internal Rate of Return (percent) At At Scenario Appraisal Completion Excluding private sector traffic 17.6 12.91 Including private sector traffic – 14.31 Sources: Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of Bangladesh for Jamuna Bridge Railway Link Project, and staff’s assessment during PCR mission.
2. Financial Analysis
48. The 'with' and 'without' project comparison used at appraisal was followed in reevaluating the Project’s financial internal rate of return. The underlying assumptions at appraisal were updated using rail operations statistics. The actual capital cost of the Project was adjusted to FY2003–2004 prices. The forecasts for incremental operating costs and revenues were based on the revised traffic forecasts used in the economic reevaluation. The average operating costs per ton-km for meter-gauge and broad-gauge freight traffic and the average revenue per ton-km were based on railway statistics. The incremental operating cost in the ‘with project’ scenario is estimated to be lower because of reduced marshaling, shunting, and ferry operations. As shown in Appendix 7, the financial internal rate of return was 7.97%, compared with 8.5% at appraisal.
3. Financial Performance
49. Bangladesh Railway’s financial performance improved until 1999 following the Railway Recovery Program, with operating ratios below 1.0. However, this could not be maintained because of delays in the implementation and operationalization of the Project, resulting in loss of traffic and revenue. Income statements are provided in Appendix 8. The Project is likely to contribute to the expected improvement in Bangladesh Railway’s financial performance with the full operationalization of the JBRLP, the anticipated growth in freight traffic, and the further growth in passenger traffic across the Jamuna River.
D. Preliminary Assessment of Sustainability
50. Project sustainability is determined by Bangladesh Railway’s ability to preserve the assets created by means of proper maintenance. Bangladesh Railway has extensive experience in maintaining railway track and bridges, but maintenance of the Jamuna Bridge railway link requires special efforts because it is expected to carry a high volume of freight traffic, including coal, hard rock, and iron ore, that will cause heavy wear and tear, and because it has dual-gauge track laid on heavy, prestressed concrete sleepers, which requires mechanical tamping with specialized equipment. ADB supported Bangladesh Railway’s proposal for project operation and maintenance by private contractors for at least 5 years following project completion. ADB, however, suggested that the Government arrange for the financing of such operation and maintenance contracts from its own resources or from other external assistance. ADB will support the Government’s efforts to the extent possible.
51. During its field visit, the Project Completion Review Mission found that the track was in reasonably good condition, but the situation will change as the operations of freight trains start. 12
The proposed operation and maintenance contract should be finalized as soon as possible to ensure the Project’s sustainability.
E. Environmental, Sociocultural, and Other Impacts
52. The Project route alignment is environmentally sound and socially responsible. No substantial adverse environmental impacts occurred, as no wildlife reserves or sanctuaries, woodlands, historic monuments, or places of religious significance were located in or near the right-of-way of the alignment, except on the eastern side of the Jamuna River, where the alignment passed near a forest plantation. Bangladesh Railway successfully implemented the mitigating measures specified in the Environmental Management Plan. Twice the number of trees that were cut were replanted through a social afforestation program under the Project.
53. Bangladesh Railway’s Land Acquisition and Resettlement Plan took adequate measures to minimize the acquisition of land and resettlement while selecting the new alignment. These included (i) ensuring a minimum impact on areas with concentrated households and structures; (ii) ensuring minimum acquisition of land for the right-of-way; (iii) returning land that was not required to cultivators, sharecroppers, and tenants; (iv) releasing land that was occupied by the ferry facilities and branch lines to the rural population; and (v) constructing a common road and rail embankment wherever possible. During implementation, the payments of cash compensation to those entitled to such compensation were delayed. In addition, the resettlement program was stalled in July 2000 because of re-bidding for appointment of resettlement NGO, and resumed in March 2001. Nongovernment organizations worked with Bangladesh Railway to implement the income generation program whereby those entitled received training in occupational skills.
IV. OVERALL ASSESSMENT AND RECOMMENDATIONS
A. Overall Assessment
54. The Project was highly relevant, because it aimed to remove critical transport bottlenecks at ferry crossings and to maximize the use of Jamuna Bridge. It also integrated the railway networks on the two sides of the river. Although the full benefits have not yet started to accrue, the Project prepared the ground for achieving them in the near future when the operation of freight services gains momentum. The Project was implemented more or less as conceived, but with some time and cost overruns. The institutional restructuring process has not yet been completed. The Project was rated as successful.
B. Lessons Learned
55. The lessons learned during the execution of previous projects in the rail sector, which were used in the project design, proved useful. In particular, the engagement of the CSC for day-to-day management of project implementation, which was done to strengthen Bangladesh Railway’s project management capability, produced the desired results. The Joydebpur-Dhaka dual-gauge project, which Bangladesh Railway is implementing without any CSC support, has already suffered several years of time overruns and will adversely affect the benefits of the JBRLP. The need for the Joydebpur-Dhaka dual-gauge linkage became apparent when the dual-gauge option was adopted for the Project at appraisal instead of the meter-gauge railway link option selected during the feasibility study. Its expeditious completion was therefore not prioritized during appraisal, and this activity was not covenanted under the Loan Agreement. 13
Bangladesh Railway obtained the Government’s approval for the project, but failed to implement it in a timely fashion.
56. Another issue in connection with the dual-gauge option adopted, which needs serious attention, is the re-rating of Jamuna Bridge to augment its rail load-bearing capacity to ensure the seamless operation of broad-gauge freight trains over the new rail link to Dhaka. ADB sponsored a study for this purpose under a small-scale TA17. The TA consultants submitted their report in October 2000, identifying the different options available for augmenting the bridge’s load-bearing capacity and suggesting further detailed study of the selected option before implementation. The issue needs to be addressed urgently to avoid further delay in reaping the full benefits of the Project.
57. The Project Completion Review Mission found that Bangladesh Railway is not fully prepared with equipment and logistics for handling the potential traffic, especially from the Madhyapara hard rock mine and the Barapukuria coal mine. Advance planning and close coordination between Bangladesh Railway and the mine authorities and other major clients is necessary. No freight trains are currently operating over the bridge, 21 months following project completion, but Bangladesh Railway plans to start such operations by December 2005. The state of affairs confirms the urgent need for institutional reform of Bangladesh Railway, as covenanted in the Loan Agreement.
58. Most of the delays in completion of the Project are attributable to the work and/or supply components procured, or envisaged to be procured, through separate contracts in accordance with the cofinancing agreements. The total amount of such cofinancing, as envisaged at appraisal, was $26.4 million, representing only 9.8% of the total project cost. The shares of the Government, ADB, and the OPEC Fund were 43.7%, 40.9%, and 5.6%, respectively. At Project completion, the Government absorbed the cost overrun of about $100 million, nearly four times the envisaged cofinancing amount. The cofinancing to be provided by EDC for the rails needed for contracts 1 and 2 was only $7 million at appraisal. The failure of the supplier nominated by EDC caused most of the delay in completion of contracts 1 and 2. At the same time, the exclusion of the supply of rails from the scope of the main civil works contracts went against the spirit of the turnkey arrangement of the contracts. Such small amounts of cofinancing for vital components of a project should be carefully examined in advance.
59. The establishment of BRCE proved to be politically sensitive. Preparatory work supported by substantial inputs of attached and/or stand-alone TAs, including the restructuring of Bangladesh Railway into lines of business as a first step, are needed before setting up BRCE. The reform agenda should be pursued in stages with proper sequencing. This raises the question of whether proposing such drastic institutional changes was even appropriate shortly after the establishment of the Bangladesh Railway Authority during 1995-1996 as a result of a study carried out under TA 1819-BAN (see footnote 17). The new institutional arrangement was functioning well, maintaining the working ratio below 1.0, and getting the private sector involved in various aspects of Bangladesh Railway’s activities, with positive results. Indeed, the terms of reference for the follow-up TA 2230-BAN: Organizational Reform of Bangladesh Railway, Phase II, approved in March 1996 (see footnote 10), provided for the consultants to “assist the Government in drafting and processing the passage of legislation to confirm the reforms already approved through resolution.” This could have been done for sequencing the step-by-step approach to corporatization, thereby maintaining the continuity of the restructuring process
17 ADB. 1998. Technical assistance to the People’s Republic of Bangladesh for Assessing Loading Impacts on the Jamuna Bridge, Manila. TA 3020-BAN, approved on 27 May 1998, for $75,000e 14
C. Recommendations
1. Project Related
60. Future Monitoring. The EA should ensure regular monitoring of the Project by compiling data, including (i) tons of freight traffic and volume in ton-km; (ii) number of passengers and volume in passenger-km, plus average trip length; (iii) average load and turnaround time of wagons; (iv) average yearly kilometers run by a locomotive in service and locomotive-km per failure; (v) total number of staff and staff productivity; (vi) financial and operational performance indicators of Bangladesh Railway, including working and operating ratios; (vii) freight tariffs and passenger fares; and (viii) public service obligation compensation received by Bangladesh Railway from the Government.
61. Covenants. Covenants 3(i) to 3(iii), 4, 18, 19, 20, and 22 (Appendix 5) should be revisited, as these are related to the establishment of BRCE, for which a revised approach and implementation schedule have now been adopted. Covenants 5 and 6, which concern the special staff separation scheme, should also be reviewed given the decision to undertake a manpower analysis before the scheme is adopted, and the likely natural attrition to reduce staff strength to the agreed level within a short time.
62. Further Action or Follow-Up. To support the initial operation of the Project, maximize the project benefits, and ensure its sustainability, the following actions are needed:
(i) Bangladesh Railway should immediately start to operate freight trains over Jamuna Bridge, with the existing wagons equipped with brakes and with newly acquired tank wagons, and expeditiously complete the ongoing work of refitting wagons with brakes;
(ii) Ministry of Communications should take initiative to immediately set up a headquarters-level steering committee and a field-level working group with Bangladesh Railway and Petrobangla18 officials to provide guidance and organize smooth and efficient transportation of hard rock and coal from Madhyapara and Barapukuria, respectively. Bangladesh Railway should start transporting the hard rock and coal using existing wagons and, expedite the procurement of specialized wagons;
(iii) Bangladesh Railway should establish similar relationships with private sector investors for developing the logistics and facilities for transporting coal from mines at Phulbari and Barapukuria, and iron ore to and finished products from the proposed steel plant near Ishurdi/Bheramara;
(iv) The Government should set up a special institutional arrangement for transporting goods from and for the mines and the proposed steel plant pending the finalization of the restructuring of Bangladesh Railway to establish BRCE. This may be a joint venture company incorporated under the Companies Act, with the Government taking the initiative and ADB providing TA; (v) Bangladesh Railway should arrange, as quickly as possible, to transport Indian goods, imported via broad gauge, to Dhaka by trans-shipment to meter-gauge wagons at a suitable point;
18 The statutory corporation that owns the Madhyapara and Barapukuria mines. 15
(vi) Bangladesh Railway should complete the Joydebpur-Dhaka dual-gauge link expeditiously;
(vii) ADB may consider providing both TA and investment funding for the re-rating study of Jamuna Bridge, as well as the related re-engineering. This would remove a major hindrance to the movement of Indian railway wagons over the bridge and to all traffic generated by the private sector; and
(viii) Bangladesh Railway should arrange for maintenance through mechanical tamping of the newly constructed railway link to ensure its sustainability.
63. Additional Assistance. Additional assistance is recommended in the following areas:
(i) TA for organizing the transportation of mining products.
(ii) Financial assistance for procuring some rolling stock for transporting coal and hard rock.
(iii) Financial assistance for setting up terminals and inland container depots at suitable locations for unloading bulk cargo and containers carried across Jamuna Bridge.
64. Timing of the Project Performance Audit Report. The operation of freight services over the Jamuna Bridge rail link has not yet started, but is likely to start during the FY2006 and stabilize by FY 2007/2008. Preparation of the project performance audit report should not start before the end of 2008.
2. General
65. For successful implementation of future ADB-supported projects, the appraisal process should ensure that the logical framework is complete and comprehensive. The framework should accommodate new requirements resulting from any major changes made in project outputs during appraisal compared to that in the feasibility study.
66. For organizations like Bangladesh Railway that both own the infrastructure and operate the services, caution should be exercised in judging whether their operational capability matches their enthusiasm and capability for project implementation. If this is not the case, suitable measures should be incorporated in the project design to enhance such organizations’ capacity.
67. Where cofinancing is envisaged, details of the cofinancing should be firmed up with the cofinancier and discussed with the government prior to the circulation of the final report and recommendation of the President. During project implementation, ADB, as the lead agency, should coordinate with the cofinanciers and share with them the findings and recommendations of ADB review missions.
68. Project scheduling should be realistic. Even if the project’s output is urgently needed, schedules should be achievable with a reasonable level of implementation efficiency at the executing agency’s level.
16 Appendix 1 Risks development of transport infrastructure, coal and rock mining, andindustry. agriculture implementation commitment to reformsrailway Railway staff commitment to commercialized operations Assumptions and and Assumptions Coordinated funding project Timely Timely Government Bangladesh • • • • • during operation of the project surveys. for the project railway benefit monitoring and evaluation report indicators and action taken statements of Bangladesh Railway reports Monitoring Mechanisms Mechanisms Monitoring Initial, end of Project, and indicators Performance EIRR assessment in Monthly reporting of key Audited annual financial assessment Training reports documents Engineering Review of project design Tender Monthly project progress All outputs subject to monitoring: • • • • • • • • • •
Achievement Performance/ Performance/ Benefits accrue after will freight services have been started. The Project has encouraged private investors to invest in mining, power generation, and other industries. Freight services are expected to start operating during FY2006; EIRR and FIRR reassessed as 7.97% and 14.31%, respectively Discussed in Appendix 5 Completed on 6 March 2004 PROJECT LOGICALFRAMEWORK 2005 Performance Performance Indicators/Targets product per capita product growth in the northwestern region year of freight in3.2 2001, million tons per year in 1.0 in 2002 compensation reduced yearly (1997–2000) by 5% in real terms reorganization of Bangladesh Railway Railway staff km of 99 of budget within line railway dual-gauge new and conversion of 250 km of to track broad-gauge existing track dual-gauge Increased gross domestic Accelerated gross domestic obligation Working ratio: less than 1.0 service Operating ratio: less than Public and Restructuring Training of Bangladesh 2002 March by Completion Transport 1.1 million tons per FIRR of 8.5% of 17.6% EIRR • • • • • • • • • • •
conversion of existing rail- comprising line way em- bankment, track, bridges, stations; telecommunica- tions and other facilities; operational equipment; and rolling stock at reduced cost of Bangladesh Railway for market-based commercial operations, achieving financial viability and reducing subsidies Design Summary Goal Outputs and1. Construction of new To stimulate economic in the northwesterngrowth region of Bangladesh Purpose 1. Improved freight services 2. Build institutional capacity Appendix 1 17 Risks
of civil works and of civil works goods through international competitive bidding adequate local currency funding Railway commitment commitment Assumptions and and Assumptions Timely procurement Timely of Arrangement Bangladesh Government • • • • • Management Plan structure of Bangladesh Railway committee in December 1996 Government in 1997 in Railway Bangladesh by 1997 September Monitoring Mechanisms Mechanisms Monitoring Monitoring Environment Monitoring Review of Project design visits Field organizational New assessment Training missions Review reports progress Monthly Monthly progress reports missions Review Approved the by Approved the by Completed and approved • • • • • • • • • • • •
Achievement Performance/ Performance/ Discussed in Appendix 5 Discussed in Appendix 5 to minimize of acquisition corporate entity Performance Performance Indicators/Targets adverse environmental adverse environmental impacts of headquarters the at Railway Bangladesh 1997 June by operational of management operations commercialized minimize adverse impacts environmental of right-of-way 1998 operational by January 2002 established as Januaryby 2002 Bangladeshby Railway and the Planning Commission Planningthe Commission, and Finance of Ministry the Railway Project proposal submission Bangladesh by Completion Approval the by Government New organizational structure structure organizational New market-based in Training to line railway of Realignment costs Revised measures Other March by I: proposal Stage Railway and policies Stage II: systems Bangladesh Railway, Bangladesh by Action • • • • • • • • • • • • and mitigation measures and monitoring organizational restructuring of Bangladesh Railway, including strengthening of Bangladesh Railway’s marketing, corporate planning, and operations functions Bangladesh Railway the Executive Committee of Economic National the Council counterpart funds for project implementation Design Summary 2. Environmental protection 3. Commercialization and 4. Corporatization of Activities activities 1.0 Preparatory 1.1 by approval proposal Project 1.2for Arrangements 18 Appendix 1 Risks Assumptions and and Assumptions
action for procurement in December 1995 retention and recruitment of feasibility consultants in March 1997 between Bangladesh Railway and deputy commissioners reports resettlement by Bangladesh Railway and construction supervision consultants reports Bangladesh Railway 1 year after the completion of resettlement in documents qualification 1995 December bidders in February 1996 Monitoring Mechanisms Mechanisms Monitoring ADB approved advance ADB approved advance Signing of contracts Plan Resettlement Monthly project progress of Monitoring by Monthly project progress Evaluation ADB approved pre- ADB approved bidding ADB approved prequalified • • • • • • • • • • •
Achievement Performance/ Performance/ Completed timely in a manner Completed timely in a manner Performance Performance Indicators/Targets the Government and Bangladesh Railway Railway Railway in consultation with deputy commissioners completed 1 month in advance of the need for land for construction in the section Bangladesh Railway in line the Resettlementwith Plan bids Submission of request by Bangladesh by Completed Bangladesh by Completed Land acquisition to be To be implemented by Preparing bidding documents prequalification bidding of Preparing Evaluation • • • • • • • final survey procurement and for retention of feasibility consultants resettlement acquisition plan, including site verification of land and buildings assisting those affected to move affected 1.4 Advance action for 2.2 Preparation of a land 2.3 Land acquisition and 2.4 Resettlement of those Design Summary 1.3 Technical design and acquisition 2.0 Land 2.1 survey, Socioeconomic acquisition and land 3.0 Construction 3.1 Prequalification of bidders Appendix 1 19 Risks
commitment Assumptions and and Assumptions Government • documents in February 1997 1997 for 99 km new construction contract award of contract of contract Bangladesh Railway and cleared the by Ministry of Forests and Environment 1997 May in BoardDirectors of on 30 May 1997 EMP the to pertaining reports management Monitoring Mechanisms Mechanisms Monitoring Bids received on 31 July Government approval of ADB approval of award missions Review Monthly progress reports Monthly progress reports reports progress Monthly report final Consultant’s reports progress Monthly IEE approved by by approved IEE SIEE circulated to ADB’s environment reports progress Monthly Annual of EMP actions Monitoring • • • • • • • • • • • • • •
Achievement Performance/ Performance/
Performance Performance Indicators/Targets prequalification prequalification 1997 October in contract 1997 October by fielded Bangladesh Railway and cleared the by Ministry of Environment and Forests the EMP Year Action Program Supervision by consultants IEE report completed by Approval of IEE and SIEE As outlined in the IEE and Target according to Five- to bid for Invitation Awardnew construction of Supervision consultantsto be • • • • • • • • works andworks facilities international and domestic construction supervision consultants of the IEE and SIEE environmental protection and mitigation measures and environmental monitoring Restructuring and Institutional Strengthening of 3.4 Engagement of 4.2 Implementation of Design Summary 3.2 Awarding of contracts 3.3 Construction of civil 4.0 Environment 4.1 Preparation and approval 5.0 Organizational
20 Appendix 1 Risks ate of return, ICB = Assumptions and and Assumptions Monitoring Mechanisms Mechanisms Monitoring Review missions assessment Review Training • •
Achievement Performance/ Performance/ DG = dual gauge, EIRR = economic internal rate of return, FIRR= financial internal r on per annum, and PSO = Public Service Obligation. Performance Performance Indicators/Targets seminars, and workshops workshops seminars, and program, training Execution of • Bangladesh Railway (through TA 2544-BAN) Railway staff
5.1 Training of Bangladesh Design Summary BG = broad gauge, BR = Bangladesh Railway, international competitive bidding, mtpa = metric t Appendix 2 21
SUMMARY OF APPRAISAL AND ACTUAL PROJECT COSTS ($ million)
Appraisal Cost Actual Cost Foreign Local Total Foreign Local Total Item Exchange Currency Cost Exchange Currency Cost A. Base Cost 1. Right-of-Way (including resettlement) – 17.60 17.60 – 20.40 20.40 2. Civil Works (railway line) 60.20 95.60 155.80 173.62 120.05293.67 3. Signaling and 11.70 9.10 20.80 14.13 0.72 14.85 Telecommunications 4. Consulting Services 7.00 5.10 12.10 11.34 5.49 16.83 5. Project Administration – 1.10 1.10 – 1.70 1.70 6. Staff Retrenchment – 24.00 24.00 – – – Subtotal (A) 78.90 152.50 231.40 199.09 148.36 347.45
B. Contingencies 1. Physical 5.70 11.00 16.70 – – – 2. Price Escalation 4.60 12.00 16.60 12.02 2.73 14.75c Subtotal (B) 10.30 23.00 33.30 12.02 2.73 14.75
C. Service Charge 4.30 – 4.30 2.80 – 2.80 Total 93.50 175.50 269.00 213.91 151.09 365.00 Note: $1 = Tk48.25. Sources: Asian Development Bank and Bangladesh Railway estimates.
ANNUAL LOAN DISBURSEMENTS, 1998–2003 22 ($)
Category 1998 1999 2000 2001 2002 2003 Total 3 Appendix Civil Works: 1A 11,218,535 10,718,712 18,410,138 17,233,731 2,065,932 2,013,722 61,660,770
Civil Works: 1B – 3,879,144 2,801,201 11,647,953 4,240,114 4,555,104 27,123,516
Consulting Services 3,626,072 3,641,219 2,324,379 1,709,671 1,414,925 810,868 13,527,134
Prior TA Financing – – – – 832,591 – 832,591
Service Charge 83,836 218,404 441,013 633,521 897,205 521,010 2,794,989
Unallocated – – – – – – –
Total 14,928,443 18,457,479 23,976,731 31,224,876 9,450,767 7,903,649 105,939,000 TA = technical assistance Source: ADB’s Loan Financial Information System
Appendix 4 23
PROJECT IMPLEMENTATION SCHEDULE 24 Appendix 4
continued PROJECT IMPLEMENTATION SCHEDULE - Appendix 5 25
STATUS OF COMPLIANCE WITH LOAN COVENANTS
Reference in Loan Covenant Agreement Status of Compliance
Project Executing Agency and Project Implementation
1. Bangladesh Railway will be the project executing agency. Schedule 6, para. 1 Complied with. The PMU established at Bangladesh Railway will be responsible for overall project implementation and will be headed by Bangladesh Railway’s general manager, Jamuna Bridge Railway Link Project. The day-to-day management and supervision of the Project will be designated to the project manager, who will report to the general manager.
Project Management Unit
Schedule 6, para. 2 Complied with. 2. Bangladesh Railway will ensure that for the duration of project implementation, the PMU is staffed with a project director (chief engineer) and project manager, both acceptable to ADB, and an adequate number of suitably qualified and experienced staff for land acquisition, resettlement, procurement of goods and civil works and construction, and commissioning of the railway. The PMU will be further supported by the construction supervision consultants.
Restructuring Program
3. The Government shall continue the restructuring of Schedule 6, para. 3 Efforts are continuing. Bangladesh Railway so that it becomes an autonomous corporate entity.
(i) Within 3 months of the effective date, the Borrower Schedule 6, para. 3 Not yet complied with. The shall have completed a detailed implementation plan (i) preparatory works needed for the Restructuring Program, including the for establishing a corporate identification of (a) the legislative framework pursuant entity will not be completed to which Bangladesh Railway shall become BRCE; within the next 2 years. (b) all assets and liabilities to be assumed by BRCE; and (c) the appropriate accounting system to be adopted by BRCE, which will incorporate internationally accepted accounting principles.
(ii) Within 36 months of the effective date, the Schedule 6, para. 3 As above. changeover to the new accounting system shall be (ii) completed; the legislation, regulations, and subsidiary rules required for converting Bangladesh Railway to a corporate entity and plans for the implementation of the Restructuring Program shall be drafted and submitted to ADB for approval; and the human resources and personal policies suitable for an autonomous, corporate railway shall be adopted by BRCE.
(iii) Within 48 months of the effective date, Bangladesh Schedule 6, para. 3 As above. Railway shall become a corporate entity, the (iii) Restructuring Program shall be fully implemented, a full set of audited accounts for BRCE under the new accounting system shall be prepared, and BRCE 26 Appendix 5
Reference in Loan Covenant Agreement Status of Compliance shall be an autonomous corporate entity with full financial accountability.
Bangladesh Railway Corporate Entity
4. The Borrower shall ensure that at least 25% of the board of Schedule 6, para. 4 As above. directors of BRCE consists of representatives of the private sector, and such representative shall not serve in or be seconded to the Government of Bangladesh or to any political or administrative subdivision thereof.
Staff Rationalization Program
5. To reduce costs and support the improvement of Schedule 6, para. 6 Substantially complied with. Bangladesh Railway’s financial viability, its total staff will be Bangladesh Railway’s reduced to 30,000 by the end of June 2003 in accordance operational staff strength in with a special staff separation program acceptable to ADB. August 2003 was 32,426. After manpower analysis under TA 3491-BAN, Bangladesh Railway will adopt a selective staff separation scheme.
6. The Borrower shall ensure that adequate budgetary Schedule 6, para. 7 Not yet due. Will be allocations for the special staff separation scheme are necessary after the committed in the development budget. manpower analysis.
Staff Retraining and Skills Development Programs
7. To introduce more reliable, effective, efficient, and Schedule 6, para. Partly complied with. commercial freight train operations in connection with the 13 Project, during the second and third years of project Bangladesh Railway’s implementation, Bangladesh Railway will develop and Mechanical (loco shed) staff implement a series of commercially-oriented retraining and were trained under the skills development programs for a number of its staff. Canadian International Development Agency Rail II Program. A retraining scheme is continuing in workshop training units at PSO Compensation five locations.
8. Bangladesh Railway will continue to receive PSO Schedule 6, para. Complied with. compensation for nonremunerative but socially desirable 14 services mandated by the Government. Because of the reduction in local passenger services, including the closure of branch lines and other actions, the PSO compensation paid to Bangladesh Railway by the Government will, however, be reduced by 5% per year in real terms from FY1998 to FY2000.
Linked Facilities
9. Bangladesh Railway will ensure that the construction of the Schedule 6, para. Complied with. sidings to the Madhapara hard rock mine and the 21 Barapukuria coal mine will be undertaken in a timely
manner and completed prior to completion of the Project.
Appendix 5 27
Reference in Loan Covenant Agreement Status of Compliance
Rolling Stock
10. Bangladesh Railway will ensure (i) that all new meter- Schedule 6, para. Partly complied with. gauge rolling stock to be acquired will be broad-gauge 22 compatible, (ii) that it will use its best efforts to obtain (i) Broad-gauge compatible additional external financing to help procure new freight meter-gauge rolling stock wagons, (iii) that a sufficient number of its existing wagon (with interchangeable required for the Project will be modified and fitted with a bogies) was not found to be brake system before the completion of the Project, and (iv) technically feasible. (ii) 150 that a total of 3,500 old freight wagons will be scrapped meter-gauge container prior to project completion. wagons have been procured and 100 tank wagons have been shipped (50 received), bilateral credits are being lined up to procure 318 broad-gauge and 135 meter- gauge hopper wagons, and with Government funding 100 container wagons and 100 tank wagons are to be procured. (iii) New wagons will have air brakes, 1,250 old wagons are programmed to be equipped with vacuum brakes. (iv) Prior to project completion, 2,517 wagons will be scrapped. Ferry Operations with Related Facilities and Equipment
11. Upon completion of the Project, ferry operations will be Schedule 6, para. Partly complied with. terminated and related infrastructure facilities, ferries, 22 pontoons, and other equipment will be divested within 12 Passenger ferry operations months of the termination of ferry operations. have been terminated, wagon ferry operations have not yet been terminated (freight train operations across Jamuna Bridge have not yet started), one of the three ferry vessels has been handed over to IWTC, the remaining two are being disposed of, and one of the five tug boats has Review already been sold.
12. In addition to the monthly reports to be provided by Schedule 6, para. Complied with. Bangladesh Railway to ADB, at the end of the second year 26 of project implementation, prior to the commencement of the track conversion work under part II of the project, ADB; Bangladesh Railway; the ministries of Communication and Finance; the Jamuna Multipurpose Bridge Division; and if they so request, the cofinanciers will jointly carry out a review of the Project. The review shall consider the Project’s progress and achievements compared with its objectives and identify any difficulties being encountered and suggest remedial measures. The Borrower shall undertake such remedial measures as required by ADB. If found necessary, adjustments may be made in the project scope, design, and implementation.
28 Appendix 5
Reference in Loan Covenant Agreement Status of Compliance Benefit Monitoring and Evaluation
13. As agreed by ADB and Bangladesh Railway, Bangladesh Schedule 6, para. Not yet started. Railway shall regularly monitor the project benefits, 27 including compiling and analyzing traffic and socioeconomic data.
Cofinancing
14. The Borrower will ensure that all cofinancing arrangements Schedule 6, para. Complied with. are in place and the relevant agreements are signed by the 25 end of the first quarter of 1998 or such other date as may be agreed to by ADB (other than the cofinancing by the Organization of Petroleum Exporting States Fund, which must be in place prior to the effective date). If any of the cofinancing agreements have not been fully executed by the end of the first quarter of 1998, the Borrower shall make sufficient budgetary allocation, or enter into other arrangements, acceptable to ADB, for such financing.
Resettlement
15. Bangladesh Railway will promptly and efficiently implement Schedule 6, para. Complied with. the Land Acquisition and Resettlement Plan. All those 17 affected will be equally eligible for compensation and mitigating measures, irrespective of tenurial status and social and economic standing. No material changes shall be made to the Land Acquisition and Resettlement Plan without prior approval by ADB.
16. Bangladesh Railway will set up and maintain an Schedule 6, para. Complied with. adequately staffed resettlement unit and will keep ADB 18 informed of the progress of the implementation of the Land Acquisition and Resettlement Plan through regular reports. Bangladesh Railway will ensure that evaluations of the resettlement process are carried out by independent agencies at completion and 1 year after completion of the relocation of displaced people.
17. The Borrower and Bangladesh Railway will ensure that Schedule 6, para. Complied with. adequate budgetary outlays for land acquisition and 19 resettlement are committed in the development budget for the years in which land acquisition and resettlement will take place.
Bank Loan
Schedule 6, para. 5 Not yet due. 18. At such time that Bangladesh Railway becomes a
corporate entity, the amount advanced to Bangladesh
Railway and that remaining outstanding under the financing
arrangements shall be converted into a loan or debt
obligation of BRCE on terms and conditions to be agreed
by the Borrower, Bangladesh Railway, and ADB.
Divestment
Schedule 6, para. 8 Not yet due. 19. If, at any time during the term of this Loan Agreement, the
Borrower intends to sell, transfer, or otherwise dispose of
any or all of its interest in BRCE, whether as a sale of
shares or assets, or to otherwise privatize part or all of the Appendix 5 29
Reference in Loan Covenant Agreement Status of Compliance operations of BRCE, the Borrower shall consult with ADB prior to taking any action to determine the most appropriate means to achieve the Borrower’s objective, having regard to the promotion of the sound financing performance of Bangladesh Railway, its capital structure, and its debt service requirements and the Borrower’s economic return. The Borrower shall ensure that any divestment or privatization will be accomplished on the basis of fair, open, transparent, competitive, and internationally accepted procedures.
20. Any divestment of more than 30% of the assets of BRCE Schedule 6, para. 9 Not yet due. or any change in ownership or control of the shares in BRCE shall be subject to prior approval by ADB. Any approval by ADB shall be on such terms and conditions as ADB may require in respect of the obligations under this Loan Agreement, which may include a shorter amortization period, changed grace period, new interest rates, and re- pricing of the loan at market-based rates.
Financial Ratios
21. The Borrower will ensure that Bangladesh Railway will take Schedule 6, para. Working ratio below 1:1 all necessary measures to maintain a working ratio less 11 maintained up to than 1:1 and to achieve, within 2 years of completion of the FY1998/1999, then it rose Project, an operating ratio of less than 1:1. steadily, reaching 1.3:1.0 in FY2003/2004. Operating ratio below 1:1 to be accomplished after the end of Financial Accounting System FY2005/2006.
22. To manage assets and liabilities and furnish management Schedule 6, para. Not yet complied with with information to use as a basis for operational and 16 because reasons recorded investment decision making, Bangladesh Railway will against item 3 (i). adopt, as a part of the Restructuring Program, a new financial accounting system within 36 months of the effective date, implementation of which shall include completion of a physical inventory and revaluation of assets and determination of appropriate depreciation rates and loan liability management based on international commercially accepted accounting principles.
Freight Tariff
23. Bangladesh Railway is to continue restructuring its freight Schedule 6, para. Complied with initially. tariff and rate-setting procedures and adjust rates based on 15 cost and market considerations. A new system is to be fully Further action to be taken as implemented by mid-1998. Bangladesh Railway is to carry part of the preparatory work out further reviews from time to time. needed for establishing BRCE as mentioned in item 3 (i). Environment
24. Bangladesh Railway will ensure that the environmental Schedule 6, para. Complied with. impacts of the Project will be minimized by implementing 15 the mitigation measures specified in the IEE and the Environmental Management Plan.
Others
Legal Opinions 30 Appendix 5
Reference in Loan Covenant Agreement Status of Compliance
25. Upon fulfillment of the obligations, or the occurrence of an Schedule 6, para. Complied with. event, as described in paras 3,5,8, and 9 of the schedule, 12 the Borrower shall furnish, or cause to be furnished, to ADB a legal opinion or opinions satisfactory to ADB from counsel acceptable to ADB that the obligations or event, as the case may be, have been duly authorized, executed, and implemented in accordance with the laws of Bangladesh and that all necessary Government approvals, consent, or authorizations have been duly issued in respect of the obligations fulfilled or actions taken.
BRCE = Bangladesh Railway Corporate Entity, IEE = initial environmental examination, IWTC = Inland Water Transport Corporation, and PMU = Project Management Unit.
Appendix 6 31
TRAFFIC FORECASTS
A. Introduction
1. The traffic forecasts at appraisal related to freight traffic only. While acknowledging that passenger trains would use Jamuna Bridge, passenger traffic was excluded from the analysis based on Bangladesh Railway’s underlying philosophy for reform that it should focus on the core business of transporting freight. The appraisal forecasts for rail freight traffic over Jamuna Bridge on completion of the Project included (i) traffic that would have been carried by rail without the project (normal traffic), (ii) traffic that would have been carried by road in the absence of the Project (diverted traffic), and (iii) traffic that would not have moved at all in the absence of the Project (generated traffic). In addition, Indian transit traffic crossing Jamuna Bridge, as well as imports and domestic traffic were also considered.
2. Since the opening of Jamuna Bridge to rail in 2004, passenger train operations have increased steadily. Freight trains have yet to operate over the bridge. A precondition to the passage of goods trains over Jamuna Bridge is a proper braking system. As most of Bangladesh Railway’s goods rolling stock is not equipped with brakes, this has restricted such traffic on the bridge. In addition, unrestricted passage of broad-gauge trains with higher axle loads has been pending a re-rating of the bridge. In light of these events, the Project Completion Review (PCR) Mission revised the appraisal traffic forecasts.
B. “Do-Nothing” Scenario
3. Data published in railway information books on freight traffic in the eastern and western zones indicated that the actual volume of trans-Jamuna rail freight from 1997 to 2004 remained more or less steady at an average of 450,000 tons annually, and that no loss in rail traffic occurred after the bridge was opened. This clearly established the captive nature of rail freight. However, this traffic, considered to be the do-nothing or normal traffic, was 30% lower than forecast. Forecasts of normal traffic were therefore reduced by 30% for all commodities across the board.
C. Traffic in the with Project Scenario
4. The appraisal estimates of total traffic for the years 2001–2005 in the ‘with project’ situation did not occur in reality. This was due to the delay in implementation and the unanticipated situation of freight trains not crossing the bridge. This situation was factored into the analysis by assuming that a slower buildup, based on actual traffic growth data, would take place until freight operations over the bridge begin. The starting year of such operations was assumed to be 2006. The buildup of traffic was estimated on the basis of the PCR Mission’s discussions with Bangladesh Railway officials and on the assumption that the PCR Mission’s recommendations, or alternative measures for securing the potential traffic, would be adopted. The buildup would increase rapidly thereafter on the premise that Bangladesh Railway would take the necessary steps to regain lost time. This assumption was applied to all commodities except coal and hard rock. For all other traffic components, namely, traffic diverted from roads, generated traffic, and Indian transit and import traffic, the appraisal forecasts in terms of volume were taken to accrue in the revised opening year (2006) onward instead of in 2001 as estimated at appraisal.
5. The PCR Mission visited the Barapukuria coal mine and the hard rock mine at Madhyapara to assess the likely start dates of production and the amount likely to move by rail. 32 Appendix 6
Discussions with officials indicated that of the annual production of 1.00 million tons of coal, most of which would be consumed by the coal-fired power plant, 0.35 million tons would move by rail on the project route. In the case of hard rock, of the 1.65 million tons produced per year, 1.06 million tons would move by rail. Forecasts were revised accordingly and assumed to develop over 2006–2008.
D. Additional Traffic from New Large Projects
6. The traffic forecasts also included additional traffic from new and upcoming large projects not considered during appraisal. These were the Indian conglomerate’s (TATA Group of Industries) steel plant at Ishurdi/Bheramara and the Australia-based Asia Energy Corporation (AEC) coal mine and power plant at Phulbari. These projects, being developed on a fast-track basis, will have an enormous impact on Bangladesh Railway by generating a huge demand for traffic. Fundamental to the success of these projects will be Bangladesh Railway’s ability to transport freight to the respective destinations. Bangladesh Railway may need to upgrade and strengthen its rail infrastructure to accommodate this demand.
1. TATA Group of Industries (TATA)
7. The TATA Group is currently negotiating with the Government of Bangladesh to invest in projects worth $2.5 billion. This investment would be the largest ever private sector investment in the country and would have major economic and social impacts. The four projects include (i) a steel plant at Ishurdi/Bheramara with a 420,000-ton capacity that will get its raw materials of iron ore from India by rail, will meet domestic demand, and will export the surplus steel; (ii) a 1,000-megawatt power plant near the Barapukuria coal mine; (iii) an open-cast coal mine at Barapukuria that will supply 3.0 million tons of coal to the power plant and sell the remaining 3.0 million tons in local and overseas markets; and (iv) a 1.0 million-ton capacity fertilizer (urea) plant at Banshkhali in Chittagong.
8. The impact of the steel plant and the coal mine on the Project would be demand for transporting 4.32 million tons of freight annually on the project route. This was incorporated in the current analysis (Table A6.1). The likely start of operations was taken as 2008.
Table A6.1: Freight Forecasts for TATA Steel, Selected Years
Million tons/year Haul Total 2008 2010 2013 Distance (million (60% (80% (100% Commodity Route (kilometers) tons/year) capacity) capacity) capacity)
Steel for domestic use Ishurdi–Joydebpur 170 0.72 0.43 0.58 0.72 Coal exports to India Barapukuria–Darsanaa 165 3.60 2.16 2.88 3.60 Total 4.32 2.59 3.46 4.32 a Between Barapukuria and Ishurdi on the project route. Source: Staff’s assessment during PCR mission.
2. Asia Energy Corporation
9. Asian Energy Corporation (AEC) is carrying out a full, definitive feasibility study for the development of an open-cast coal mine at Phulbari. The mine will be capable of producing 15 million tons of high-quality thermal coal annually, which will be used for domestic consumption as well as for exporting to markets in Asia. Coal mining is expected to start in 2008 and to attain almost full production by 2013. Phulbari will be Bangladesh’s second coal mine after Appendix 6 33
Barapukuria and will help reduce the country’s dependence on imported coal. It will serve as a catalyst for the growth of industries servicing the operation. The company is also contemplating setting up a mine-mouth power station of 2,500 megawatts. Phulbari is well connected by rail to India and to the Bangladesh seaport of Mongla.
10. Coal transportation forecasts by rail, as estimated by AEC, formed the basis for assessing the implications of this demand for the project route. Estimates indicated that 13.75 million tons of coal would be transported annually from Phulbari to different destinations, such as Dhaka, Khulna, and Darsana (India). The phasing assumed for the current analysis is presented in Table A6.2.
Table A6.2: Coal Freight Forecasts for AEC, Selected Years
Haul Distance Million tons per year Route (kilometers) 2008 2010 2013 Phulbari–Ghazipur (Joydebpur and/or Dhaka) 326 0.25 1.0 1.75 Phulbari–Khulna/Monglaa 156 - - 5.25 Phulbari–Darsana/India a 156 1.25 6.75 6.75 Total 1.5 7.75 13.75 a. The haul distance between Khulna and India is the distance between Phulbari and Ishurdi on the project route. Source: Staff’s assessment during PCR mission.
E. Forecast Traffic Volumes
11. The volumes of traffic forecast, revised on the basis of the foregoing assumptions, are shown in Table A6.3.
34 Appendix 6
Table A6.3: Forecast of Rail Freight Traffic on the Jamuna Bridge Rail Link Project , Selected Years
Category 2006 2010 2015 2020 2028 Without Project Thousands of Tons 450 450 451 452 452 Millions of Ton-Kilometers 200 200 200 200 200
With Project Normal Traffic Thousands of Tons 450 450 451 452 452 Millions of Ton-Kilometers 200 200 200 200 200 Diverted Traffic Thousands of Tons 339 623 631 637 630 Millions of Ton-Kilometers 310 593 600 606 599 Generated Traffic Thousands of Tons 278 1,924 1,971 2,028 2,094 a Millions of Ton-Kilometers 109 787 808 834 863 Additional Generated Traffic (TATA) Thousands of Tons – 3,456 4,320 4,320 4,320 Millions of Ton-Kilometers – 573 716 716 716 Additional Generated Traffic (AEC) Thousands of Tons – 7,750 13,750 13,750 13,750 Millions of Ton-Kilometers – 1,379 2,443 2,443 2,443 Import Traffic Thousands of Tons – 769 936 1,034 1,211 Millions of Ton-Kilometers – 189 229 253 297 Indian Transit Traffic Thousands of Tons – 400 500 500 500 Millions of Ton-Kilometers – 212 265 265 265 Total (With Project) Thousands of Tons 1,067 15,372 22,559 22,721 22,957 Millions of Ton-Kilometers 619 3,933 5,261 5,317 5,383 TATA = TATA Group of Industries, India; and AEC = Asia Energy Corporation, Australia Source: Staff’s assessment during PCR mission.
Appendix 7 35
ECONOMIC AND FINANCIAL REEVALUATION
A. Economic Reevaluation
1. Introduction
1. The methodology used in the economic reevaluation was similar to that used during appraisal. The economic benefits were quantified by comparing the with- and without project cases. The assumptions in the appraisal report pertaining to traffic forecasts were modified, based on updated information obtained from Bangladesh Railway. Traffic likely to be generated by new mining and industrial proposals was also included in the analysis. The benefit period was taken as 25 years, from 2004 to 2028, whereas it was from 2001 to 2025 at appraisal. Actual costs and the actual implementation period were used. All costs and benefits were measured at border price equivalent values and expressed in FY2003/2004 prices.
2. Economic Costs
2. The economic costs of construction were estimated from the actual financial costs of civil works incurred during 1997–2004 by excluding transfer costs such as local taxes and duties, price contingency provisions, and service charges. The local cost components, or the costs of nontraded inputs (local materials) incurred in local currency, were adjusted to border prices by applying a standard conversion factor of 0.834. Unskilled local labor was valued using a shadow wage rate of 0.75. The actual implementation period (8 years), which was longer than that estimated at appraisal (4 years), was used to allocate annual capital costs. The capital cost was brought forward to the FY2003/2004 level using the actual inflation rate (2.7% per year) during 1997–2004. The residual value of the investment was based on a 35-year economic life of the Project, as at appraisal.
3. Assumptions about maintenance costs were same as at appraisal. Annual maintenance costs for track and railway facilities were estimated at 0.5% of capital costs for the first 15 years of the Project’s life, rising to 1% thereafter. Additional periodic maintenance costs were assumed to take place in 2010, 2011, 2017, and 2018.
3. Traffic Forecasts
4. Traffic forecasts for the analysis were revised in light of the actual growth of traffic in recent years as well as the new traffic likely to be generated by the proposed development of industries and mines. Details of traffic forecasts are discussed in Appendix 6.
4. Benefits
5. Due to delays in project implementation and the start of freight operations on the bridge and the substantially lower than forecast freight traffic during the initial stage, the benefits were lower than those envisaged at appraisal. The major economic benefits considered during appraisal were retained in the current analysis. These were (i) reduced rail operating costs, (ii) resource savings resulting from the cessation of ferry services, (iii) avoided road transport operating costs as a result of reduced road congestion, (iv) deferred road maintenance expenditures, (v) deferred road upgrading expenditures, and (vi) avoided environmental costs as a result of reduced emissions following the diversion of traffic from road to rail. In addition, reductions in losses during trans-shipment were included where appropriate, as were savings resulting from reduced delays in the transport of goods waiting for ferry crossings. Unit rail 36 Appendix 7 operating costs in the without and with project cases were taken to be same as at appraisal, because the rates have changed little.
5. Economic Internal Rate of Return
6. The economic internal rate of return (EIRR) was evaluated for two scenarios. The EIRR excluding the impact of the new proposals by the Asia Energy Corporation (AEC) and TATA Group of Industries (TATA) was reevaluated as 12.91%, compared with 17.6% at appraisal (Table A7.1). The lower EIRR was due mainly to the higher construction costs and the delay in the realization of benefits. The EIRR including the two large projects was 14.31% (Table A7.2).
6. Sensitivity Analysis
7. Sensitivity tests were undertaken to determine the variation in the calculated EIRRs to changes in the assumptions. These tests were carried out for a 10% increase in operating cost, a 10% reduction in total benefits, and a combination of both. The results are shown in Table A7.3. While both scenarios remain viable in the base case, only scenario 2 remains viable under all sensitivity cases. Scenario 2 could withstand a 16% fall in forecast traffic, while scenario 1 could not absorb even a 10% fall in traffic.
Table A7.3: Sensitivity Analysis
Scenario 1 Scenario 2 Without AEC and TATA With AEC and TATA EIRR NPV Switching EIRR NPV Switching Case (%) (Tk million) Value (%) (%) (Tk million) Value (%) Base Case 12.91 904.20 0 14.31 2,437.55 0 O&M Cost Increased by 10% 12.84 837.19 125 14.25 2,370.54 350 Total Benefits Reduced by 10% 11.59 (-) 395.23 6 12.96 984.79 16 Combination of Both 11.52 (-) 462.24 0 12.89 917.78 0 AEC = Asia Energy Corporation, EIRR = economic internal rate of return, NPV = net present value, O&M = operation and maintenance, and TATA = TATA Group of Industries, India. Source: Staff’s assessment during PCR mission. .
B. Financial Analysis
8. The financial internal rate of return (FIRR) of the Project was reevaluated using a with and without project comparison as done at appraisal. The major assumptions used were as follows:
(i) All components of the FIRR calculations are expressed in constant FY2003/2004 prices;
(ii) Capital costs reflect actual project costs incurred. They include taxes, duties, and physical contingencies, but exclude interest, price contingencies, and service charges. The residual value of the tracks at the end of the analysis period has been included as negative capital costs. The track life is assumed to be 35 years;
(iii) Track maintenance costs and investment in broad-gauge rolling stock have been included in the maintenance costs. Operating costs (excluding depreciation) and Appendix 7 37
revenues were based on FY2001/2002 prices provided by Bangladesh Railway and adjusted to FY2003/2004 prices. The freight variable cost assumed in the without project scenario was Tk1.62 per ton-km for meter gauge and Tk1.35 per ton-km for broad gauge. The incremental operating costs in the with project case were assumed to be lower because of reduced marshaling, shunting, and ferry operations;
(iv) The average freight tariff of Tk1.46 per ton-km provided by Bangladesh Railway, used to estimate the incremental revenues, was not updated to FY2003/2004 prices, as freight rates have changed little. The incremental revenues were based on the forecasts of trans-Jamuna freight traffic used in the economic reevaluation. Potential revenues from the sale or lease of land vacated by the ferry service operations and savings in operation and management costs resulting from the suspension of ferry service were also included as a benefit; and
(v) The FIRR of the Project was reevaluated as 7.97%, compared with 8.5% at appraisal (Table A7.4).
38 Appendix 7
12.91% 12.91% million Tk904.20 V R NP EIR up of Industries, India
Gauge Traffic on Broad PV = net present value; and TATATATA = Gro (taka million) (taka million) d Emissions Traffic d Emissions Transit Cost Benefits Benefits ditional Reduced Import Indian Total Total Net EIRR = economic internal rate of return; N Table A7.1: EIRR Calculation without TATA and AEC Traffic, 2004–2028 2004–2028 AEC Traffic, and without TATA EIRR Calculation Table A7.1:
Cost Benefits Closures Benefits Benefits Closures Benefits Cost 117.95 264.97 117.95 477.83 61.51 625.89 2,134.23 - 156.33 264.97 117.95 117.95 61.51 638.41 2,816.14 547.70 1,147.21 2,016.29 - 156.33 2,698.19 547.70 - 58.97 - 429.44 306.35 1,069.10 43.02 267.10 52.99 58.97 2,168.00 2,109.03 2,109.03 2,168.00 58.97 52.99 (350.35) 0.00 267.10 350.35 33.12 - 1,450.99 1,637.25 - - - 186.26 43.02 - 958.81 - 1,069.10 303.33 1,100.64 291.38 1,159.61 58.97 342.00 58.97 306.35 - 264.97 2,581.72 2,640.69 127.29 - 58.97 58.97 2,636.93 475.25 429.44 2,695.90 - - 58.97 264.97 58.97 61.63 2,691.19 2,750.16 - 264.97 513.60 58.97 105.99 122.62 432.05 (335.52) 67.49 349.48 1,657.21 159.36 58.97 - 264.97 542.84 1,534.59 61.63 534.19 63.65 158.98 122.62 409.00 61.50 422.42 1,742.83 159.36 156.33 58.97 - 531.57 1,620.21 61.60 544.88 63.65 1,107.21 176.92 - 211.97 176.92 62.23 759.32 60.91 438.82 536.96 2,160.68 1,142.00 - 159.36 176.92 - 156.33 - 58.97 530.31 1,983.76 264.97 176.92 411.35 61.63 456.87 1,891.13 1,177.77 - 159.36 264.97 122.62 156.33 - 61.63 493.95 536.96 3,370.72 1,714.21 1,856.89 536.96 156.33 3,248.10 - 156.33 58.97 - 58.97 536.96 63.65 536.80 - - 58.97 543.98 - - 58.97 - 176.92 - 264.97 176.92 500.40 62.23 555.78 2,083.68 - 156.33 264.97 176.92 176.92 62.23 566.89 2,802.38 - 543.98 1,207.98 1,906.77 - 156.33 2,625.47 117.95 - 543.98 264.97 117.95 476.25 62.23 578.23 2,081.99 - 156.33 117.95 - 543.98 1,964.04 264.97 117.95 465.23 62.23 589.79 2,082.53 - 156.33 117.95 - 543.98 1,964.59 264.97 117.95 454.96 61.51 601.59 2,087.06 - 156.33 264.97 117.95 117.95 61.51 613.62 2,802.11 547.70 1,157.98 1,969.12 - 156.33 2,684.16 547.70 - 117.95 - 264.97 117.95 915.85 61.51 651.18 2,597.54 - 156.33 117.95 - 547.70 2,479.60 264.97 117.95 676.53 61.51 664.20 2,371.24 - 156.33 117.95 547.70 2,253.30 264.97 117.95 429.00 61.51 677.49 2,137.00 - 156.33 547.70 2,019.06 Staff’s assessment duringStaff’s PCR mission. 12,585.83 58.97 ------12,644.80 0.00 (12,644.80) (12,644.80) 0.00 12,644.80 - - - - - 58.97 12,585.83 (3,894.33) 117.95 (3,894.33) - 173.02 156.33 547.70 61.51 691.04 (3,776.38) 1,894.57 264.97 5,670.96 Investment Incremental Investment Rolling Freight Savings Ad
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Ferry Roa from Transport Stock Maintenance Year Cost AEC =Corporation, Asia Energy Australia; Source: Appendix7 39
14.31% Tk 2,437.55 million V R NP EIR
up of Industries, India.
PV = net present value; and TATATATA = Gro
(Tk million) EIRR = economic internal rate of return; N Table A7.2: EIRR Calculation with TATA and AEC Traffic, 2004–2028 Traffic, 2004–2028 with AEC and TATA EIRR Calculation Table A7.2: Gauge Gauge 117.95 - 547.70 156.33 477.83 61.51 625.89 264.97 338.07 99.16 117.95 2,571.45 2,453.51 2,453.51 3,135.41 2,571.45 3,253.36 117.95 117.95 99.16 99.16 338.07 338.07 264.97 264.97 625.89 61.51 638.41 61.51 477.83 1,147.21 156.33 156.33 547.70 - 547.70 117.95 - 117.95 Cost Benefits Closures Benefits on Broad Traffic Broad on Benefits Closures Benefits Cost - 58.97 - 536.96 156.33 (335.52) 61.63 475.25 264.97 190.87 79.33 58.97 1,429.81 1,370.83 1,370.83 1,429.81 2,109.03 1,450.99 2,168.00 1,637.25 58.97 3,685.32 2,253.96 58.97 3,807.94 2,430.87 79.33 186.26 1,984.41 - - 2,161.32 - 122.62 176.92 3,018.9433.12 - - 52.99 - 190.87 3,077.91 176.92 3,074.15 958.81 79.33 99.16 267.10 3,133.12 3,128.41 264.97 43.02 (350.35) 79.33 0.00 58.97 303.33 3,187.39 190.87 338.07 - 58.971,069.10 475.25 350.35 342.00 - 99.16 - 190.87 61.63 - 291.38 - 58.97 211.97 99.16 - - 306.35 2,343.99 264.97 - 127.29 (335.52) 338.07 3,062.69 264.972,520.91 - 58.97 99.16 438.82 429.44 3,239.60 60.91 493.95 338.07 - 58.97 456.87 61.63 - 176.92 759.32 264.97 61.63 338.07 176.92- 58.97 2,401.81 411.35 264.971,856.89 159.36 99.16 513.60 2,519.76 - 99.16 2,406.34 61.63 264.97 530.31159.36 3,121.39 534.19 2,524.29 - 156.33 156.33 338.07 - 117.95 3,239.33 61.60 58.97 536.96 1,107.21 544.88 63.65338.07 542.84 - 176.92 536.96 159.36 - 536.96 117.95 62.23 58.97 432.05 99.16 1,142.00 63.65264.97 531.57 117.95- 176.92 67.49 156.33 159.36 - 264.97 409.00 99.16 1,177.77 63.65 - 58.97 555.78 349.48 61.50 156.33 59.4999.16 2,916.82 1,754.97 105.99 38.27338.07 122.62 536.96 62.23 566.89 3,034.76 - 58.97 1,632.35 422.42 62.23 156.33 59.49 2,690.52 1,840.59 158.98 38.27338.07 - 122.62 536.80 500.40 264.97338.072,808.47 - 58.97 1,717.98 1,207.98 2,456.28 - 543.98 117.95 156.33 264.972,574.23 - 58.97 589.79 - 117.95 264.97 543.9862.23 156.33 99.16 - 58.97 601.59 - 117.95 465.23 543.9861.51 613.62 99.16 - 176.92 61.51 338.07 - 454.96 156.33 99.16 - 176.92 1,157.98 338.07 543.98156.33 264.97 - 338.07 - 547.70156.33 264.97 - 117.95 651.18 - 547.7061.51 264.97 - 117.95 664.20 - 915.85 61.51 117.95 - 117.95 677.49 676.53 61.51 156.33 429.00 547.70156.33 - - 547.70156.33 - 117.95 - 547.70 - 117.95 543.98 - - 117.95 156.33 476.25 62.23 578.23 264.97 338.07 99.16 117.95 2,519.21 2,401.26 Cost Maintenance Stock Transport from Ferry Road Emissions Emissions Road Traffic Ferry Transit from Transport Cost Stock Benefits Benefits Maintenance Cost Staff’s assessment duringStaff’s PCR mission. 12,585.83 58.97 ------12,644.80 0.00 (12,644.80) (12,644.80) - 0.00 58.97 - - 12,585.83 - 12,644.80 - - - (3,894.33) 117.95 - 547.70 156.33 173.02 61.51 691.04 264.97 338.07 99.16 (3,776.38) 2,331.79 (3,894.33) 117.95 6,108.18 (3,776.38) - 547.70 156.33173.02 99.16 61.51 338.07 264.97 691.04 2004
Year Investment Incremental Rolling Freight Savings Additional Reduced Import Indian AEC 2005 TATA 2006 Total 2007 Total 2008 2009 2010 Net 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 AEC =Corporation, Asia Energy Australia; Source:
40 Appendix 7
55) (21,925.32) 931.91 2,925.27 934.21 2,920.08 936.46 2,914.98 938.67 2,909.99 940.83 2,905.09 942.95 2,900.30 945.04 2,895.59 913.13 2,878.97 915.13 2,874.45 917.09 2,760.12 919.01 2,755.77 920.90 2,971.29 876.59 2,950.17 880.78 2,942.05 123.14 2,302.79 884.25 2,933.04 129.26 2,078.87 014.41 2,029.88 013.19 1,525.29 118.94 1,570.04 FIRR NPV Tk6,644 million 7.97%
79.94) 6,929.56 7,009.50 55) 21,643.77 (281. 55) 21,643.77 1,045.51 1,351.15 43 305.64 4.46 4,006.64 6, 4.46 4,006.64 6.76 4,014.13 6, 6.76 4,014.13 9.01 4,021.47 6, 9.01 4,021.47 1.22 4,028.68 6, 1.22 4,028.68 3.38 4,035.74 6, 3.38 4,035.74 5.50 4,042.66 6, 5.50 4,042.66 7.59 4,049.45 6, 7.59 4,049.45 5.68 4,034.16 6, 5.68 4,034.16 7.68 4,040.68 6, 7.68 4,040.68 9.64 4,156.97 6, 9.64 4,156.97 1.56 4,163.24 6, 1.56 4,163.24 3.45 3,949.61 6, 3.45 3,949.61 9.14 3,926.43 6, 9.14 3,926.43 3.33 3,938.73 6, 3.33 3,938.73 5.69 2,820.36 5, 5.69 2,820.36 8.79 3,050.40 5, 8.79 3,050.40 3.93 2,984.52 5, 3.93 2,984.52 282.33) (330.79) (282.33) 282.33) (330.79) 48.46 6696.80 3,951.21 6, 6696.80 3,951.21 2822.71 1,487.90 3, 2822.71 1,487.90 3, 2928.46 1,548.90 70 330.16 693.86 61.94 631.91 (taka million) (taka million) emental Savings Revenue Revenue Total Total emental Savings Net 3,779.21 187.45 6742.11 ( 6742.11 3,779.21 187.45 Table A7.4: FIRR Calculation
Cost Cost Closures Closures Cost Cost Cost Maintenance Stock Operating from Ferry Ferry Benefits Benefits Cost Stock from Operating Maintenance Cost Staff’s assessment duringStaff’s PCR mission.
2028 (4,078.93) 219.78 - 2027 219.78 - 674 3,786.85 187.45 2026 219.78 - 674 3,794.35 187.45 2025 219.78 - 674 3,801.69 187.45 2024 219.78 - 675 3,808.90 187.45 2023 219.78 - 675 3,815.96 187.45 2022 219.78 - 675 3,822.88 187.45 2021 219.78 - 675 3,829.66 187.45 2020 219.78 - 672 3,814.38 187.45 2019 219.78 - 672 3,820.90 187.45 2018 329.67 - 672 3,827.30 187.45 2017 329.67 - 673 3,833.57 187.45 2016 109.89 - 673 3,839.72 187.45 2015 109.89 - 668 3,816.54 187.45 2013 2014 109.89 1.30 109.89 3,840.02 187.45 - 669 3,828.84 187.45 2012 109.89 - 493 2,710.47 187.45 2011 329.67 - 493 2,720.73 190.47 2004 21,978.08 109.89 - (444.20) - (281. 2005 2006 109.89 5.29 2007 109.89 (445.97) 2.60 2008 109.89 (50.55) 2009 - ( 363. 109.89 - 1.30 2010 109.89 1,376.71 1.30 190.47 195.75 984. 329.67 1,437.71 366.72 190.47 - 482 2,654.85 190.47 FIRR = financial internal rate of return; and NPV = net present value; Year Investment Incremental Rolling Incr Source: Appendix 8 41
FINANCIAL PERFORMANCE A. General
1. Bangladesh Railway has improved its financial performance in the past and had achieved a working ratio of around 1.0 during FY1995/1996, compared with working ratios in excess of 1.4 earlier. It achieved this improvement by focusing on freight traffic, reducing the number of staff, and closing loss-making branch lines. During appraisal, further improvements in Bangladesh Railway’s financial performance were envisaged based on continued improvement in the working ratio, steady increases in freight and passenger revenue, and further reductions in staff of 10,000 from FY1997/1998 through FY2002/2003. Operational efficiency resulting from the organizational reform of Bangladesh Railway and the revision of freight tariffs rationalized under the Tariff Restructuring Plan was also expected to contribute.
B. Income Statements
2. The income statements of Bangladesh Railway, as actually achieved, are given in Table A8.1. Bangladesh Railway’s financial performance, as measured by working and operating ratios, improved up to 1999 following the Railway Recovery Program, mainly because of the greater commercial focus and the rationalization of staff and redundant assets. The ratios could not be maintained below 1.0, however, because of delays in project implementation and operationalization, which resulted in a loss of traffic and revenues. The projected growth in freight traffic and the growing passenger traffic across Jamuna River are likely to bring about the expected improvements in the financial performance of Bangladesh Railway.
Table A8.1: Bangladesh Railway Income Statement, –Fiscal Years 1997–2004 (taka million) Item 1997 1998 1999 2000 2001 2002 2003 2004 Revenue Passenger Traffic 1,004 1,120 1,313 1,458 1,566 1,589 1,611 1,732 Freight Traffic 1,043 1,186 1,354 1,189 1,314 1,466 1,450 1,344 Other Coaching 124 119 135 108 107 96 100 104 Miscellaneous 1,136 912 941 660 678 733 1,040 761 Public Service Obligation 883 860 860 860 860 860 860 860 Welfare Grant 138 149 153 156 157 157 166 174 Total Revenue 4,327 4,518 4,756 4,431 4,681 4,901 5,227 4,976
Working Expenses General Administration 732 794 842 912 927 961 986 1,025 Repairs and Maintenance 1,406 1,431 1,512 1,583 1,678 1,756 1,979 2,290 Operations: Staff 619 666 707 749 766 789 796 874 Operations: Fuel 545 574 575 614 726 780 855 904 Operations: Other 293 339 325 368 379 394 432 495 Miscellaneous 546 529 651 473 762 676 819 806 Total Working Expenses 4,142 4,334 4,612 4,699 5239 5,355 5,867 6,394
Depreciation ------Net Income 185 184 144 (-) 268 (-) 558 (-) 454 (-) 640 (-) 1,418 Working Ratio 0.96 0.96 0.97 1.06 1.12 1.09 1.12 1.29 Operating Ratio 0.96 0.96 0.97 1.06 1.12 1.09 1.12 1.29 Public Service Obligation/ Total Revenue (%) 20.40 19.00 18.10 19.40 18.40 17.50 16.5 17.30 Note: Totals may not add because of rounding. Source: Bangladesh Railway. 2004. Information Book.