Staff Correspondent: The Chinese-funded Power Grid Network Strengthening Project has proposed cost enhancement of Tk 622 crore for a project of Power Grid Company of Bangladesh Limited (PGCBL) before its beginning because of delay in signing loan deal for the project.
The company, the implementing agency of the project, wrote to the planning commission on September 30 proposing escalation of the project cost to Tk 14,326 crore from Tk 13,703.30 crore, officials said.
The company also proposed extending the deadline of the project by three more years from the current one expiring in 2021 in the same proposal.
Project director Sukanto Lal Nag said they could not start implementation of the project because of delay in signing financial loan agreement with Chinese Exim Bank.
In October 2016, the company signed commercial agreement with Chinese consultant firm CCCE-ETERN-FEPTC for implementing the project aiming at enhancing the country’s power distribution system.
The executive committee of the National Economic Council approved the project on November 22, 2016 but the financial loan deal was yet to be signed because tough loan approval procedure of the Chinese bank.
The Economic Relations Division on October 12 drafted financial loan deal of the project consulting with the EXIM Bank, said Sukanto Lal Nag.
He said nature of the loan deal was mainly buyers’ credit for which the company would have to take permission from the non-concessional loan committee headed by the finance minister.
Still, he expected that the loan deal could be signed by this year.
The country’s external credit would be more than double in 2022 – just in a span of five years – amid high growth of suppliers’ credits and short-term borrowings to finance infrastructure projects, according to the finance ministry’s medium-term macroeconomic outlook.
Experts said the high growth of such loans taken mostly on ‘political consideration’ with high interest rates against short maturity period would increase significantly after 2022.
Policy Research Institute executive director Ahsan H Mansur pointed that suppliers’ credit was the worst form of loan as borrowers have no choice to select the goods suppliers.
The company in its proposal to the planning commission said devaluation of local currency against the US dollar was main reason for cost escalation of the project,
The exchange rate became Tk 84 against one dollar which was Tk 79.5 when the project was approved by the ECNEC in 2016, said the company’s proposal.
The planning commission, however, objected to demands for allocation including Tk 26.9 crore for hiring charge, Tk 20.3 for testing fee, Tk 68.3 crore for survey fee and miscellaneous expenditure of Tk 82.6 crore with the revised proposal of the project.
Member of Planning Commission Shahin Ahmed Chowdhury, said they asked the company to rationalise its proposed demand for allocation for those heads.
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