Germany’s KFW takes back Tk73cr grant after dispute with DPDC

Delay in the implementation of the pre-payment meter installation project and disagreement between Dhaka Power Distribution Company Limited (DPDC) and the German consulting firm FICHTNER have led to Germany's KFW taking back Tk73 crore of the initially pledged Tk91 crore grant for the project.

At a cost of Tk173 crore, the approved period of the "Pre-Payment Metering Project for six NOCS Division under DPDC" was July 2013 – December 2015. Later the term was extended three times in two years till December 2020. On the other hand, according to the agreement, the German state-owned bank KFW's disbursement period was until 31 December 2020.

As the fund could not be spent within the stipulated time, KFW made it known through the Economic Relations Department (ERD) that it would no longer finance the project, which aims at the installation of 144,500 pre-payment meters in Dhaka and Narayanganj.

However, DPDC, the implementing agency of the project, says it is the German consulting firm FICHTNER that caused the delay.

The progress of the project was stalled when DPDC and FICHTNER had disagreements over what type of pre-payment meters will be used.

"The consulting firm for the project was hired from Germany as the grant came from that country. The firm proposed an old model pre-payment meter, while DPDC suggested modern pre-payment meters at affordable prices. Disagreement over this led to the project to delay," said Engineer Bikash Dewan, managing director of DPDC.

According to DPDC and Planning Commission sources, the implementation progress of the project has been a mere 22.8% in 9 years. Under these circumstances, another extension until June 2024 has been proposed.

In the revised project proposal review report, the Planning Commission says the project work has been delayed due to the consulting firm's failure to prepare documents in time. Later, the decision on the meter technology and appointing a contractor on a turnkey basis was also delayed. 

The Planning Commission says that if the project had been implemented on time, there would be no need to increase the disbursement period and at present there would be no need to implement the project with the government's own funding.

FICHTNER's Head of Communication Antonio Miralles declined to comment on the matter, citing "reasons of confidentiality on clients' projects". 

Usually multilateral and bilateral projects are implemented with funding from a development partner. The contract period or disbursement period is extended in case of delayed implementation.

Asked why the German-funded project did not extend the disbursement period, a senior ERD official said on condition of anonymity that Germany usually extends the disbursement period in such cases. However, KFW did not explain why the project was not extended.

Only Tk17.61 crore was spent from the grant during the contract period and the German consulting firm FICHTNER received a significant portion of the bill.

Meanwhile, due to KFW's pulling back from funding, it has been decided to implement the project with government funds and DPDC's own funds. Recently a revised project proposal has been sent to the Planning Commission for approval.

In the original project proposal, in addition to KFW's Tk91 crore, Tk68.23 crore was allocated from government funds and Tk14.12 crore from DPDC's own funds.

In the amended proposal, the cost of the project has been reduced to Tk103 crore, including Tk17 crore, already used from the German grant. It recommended Tk73.47 crore from government funds and Tk11.93 from DPDC's.

The revised proposal cuts back spending on training, travel expenses, fuel, stationery, machinery, equipment and civil works.