Review trims MRT-5 project cost by nearly Tk7,000cr

The cost of the 17.20 km metro rail MRT-5 (Gabtoli-Dasherkandi) Southern Route project saw a sharp 15% reduction in cost following a recent review, indicating the potential of savings that can be achieved through reassessments of mega projects, initiated by the previous government.

The cost cut, equivalent to Tk6,898 crore, came after Dhaka Mass Transit Company Limited (DMTCL) re-evaluated the project on instructions from the Planning Commission, now led by interim government's Adviser Prof Wahiduddin Mahmud.

Mohammad Abdur Rouf, managing director of DMTCL, told TBS that the costs of various project components were reduced through detailed design adjustments. 

The revised project proposal has been submitted to the Road Transport and Highways Division for further review which could result in additional cost cuts, he said.

Project Director Md Abdul Wohab said that the cost was cut by shortening the loan interest repayment period, cutting capital expenditures, and reducing inflated contingency estimates.

According to DMTCL officials, costs may be cut further following scrutiny by the Road Transport Division and finally by the Physical Infrastructure Division of the Planning Commission.

Initially, during the Awami League era, DMTCL had proposed a budget of Tk54,619 crore for the project. An evaluation committee at the Planning Commission reviewed the proposal in April this year but no cost adjustments were made at that time.

After the AL government was toppled, the interim government, led by Dr Yunus, decided to reassess spending on major infrastructure projects. This project was sent back to DMTCL for review leading to a revised projected cost of Tk47,721 crore.

After the initial review, DMTCL submitted the revised Development Project Proposal (DPP) to the Road Transport and Highways Division. 

In a letter to Road Transport, DMTCL said the estimated cost was cut based on an analysis of costs, unit rates, foreign loan interest, and feasibility reports, along with a re-examination of the project's context and priorities.

The DPP outlines that of the total cost, Tk39,138 crore will be covered by foreign loans. The Asian Development Bank (ADB) and South Korea have initially agreed to provide the amount.

The MRT-5 southern route will connect the following areas: Gabotli, Technical, Kalyanpur, Shyamoli, College Gate, Asad Gate, Russell Square, Karwan Bazar, Hatirjheel, Tejgaon, Aftabnagar, Nasirabad, and Dasherkandi.

The metro line will run 13.10 km underground from Gabtoli to Aftabnagar and 4.10 km elevated from Aftabnagar to Dasherkandi.

How the cost was reduced

Md Abdul Wohab, project director of MRT-5, told TBS that the revised cost estimation has yet to be finalised, as it still needs approval from the Planning Division.

He said that readjusting the loan interest repayment period resulted in a significant reduction in the overall estimated cost.

"Initially, we estimated loan interest costs over a longer period, but we have now aligned the interest period with the project's duration. This adjustment saved Tk4,700 crore, reducing the total interest from Tk6,500 crore to Tk1,800 crore," he said.

"Additionally, inflated estimates were identified in contingency, which also decreased a little. Furthermore, the cost has been cut down after refining the estimated capital expenditures (Capex), based on detailed design specifics and actual market prices, leading to savings of about Tk1,500-2,000 crore," said the project director.

Abdul Wohab further said, "Typically, initial estimates include extra materials to cover any adjustments later. However, with detailed designs in hand, we now have precise requirements, allowing us to avoid overestimations."

"The cost may decrease further if the dollar rate remains stable. However, fluctuations in the dollar price could increase costs by around Tk800-1,000 crore," he added.

'Proper scrutiny needed for project approval' 

Transport expert Professor Shamsul Hoque told TBS that there was a lack of proper scrutiny in approving projects by the previous government, indicating that estimations often went unquestioned. 

"No one asked why certain high costs were included. This lack of questioning was partly because those approving the projects also benefited, leading to inflated project estimates," he said.

He continued, "In cases where the project authority self-initiated cost reductions, it became clear that inflated expenses still existed in various segments, especially in large-scale projects."

Urging the current interim government to thoroughly review all ongoing and upcoming projects, Shamsul said, "Over the past 15 years, a culture of inflating costs has developed, leading to our per kilometre construction costs being higher than even in Europe. This was due to a lack of accountability."

He said that to break this pattern, this government must investigate why costs are estimated so high and hold those responsible accountable.

Govt mulls alternatives to MRT-5 with focus on Old Dhaka

An official from the Planning Commission said further reviews will be conducted to assess whether the project is feasible given the current circumstances.

Although the cost of MRT-5 has been reduced, the government is reportedly considering alternatives to this project. The government wants to bring densely populated Old Dhaka under the metro network but the MRT-5 southern route excludes the area.

However, the MRT Line-2 (Gabtoli-Sadarghat-Narayanganj) includes Old Dhaka on its route and is being considered as an alternative to the MRT-5 (Southern Route).

Planning Commission officials said the MRT Line-2, if implemented, will link Gabtoli to Narayanganj via Old Dhaka.

In contrast, commercial development has been limited up to Dasherkandi, the endpoint of MRT-5. Given the economic significance, the Commission is prioritising MRT-2 as the preferred option over MRT-5.

The main route of MRT Line-2 will run from Gabtoli through Dhaka Udyan, Mohammadpur Bus Stand, Zigatla, Science Laboratory, New Market, Azimpur, Palashi, Dhaka Medical College, Gulistan, Motijheel, Kamalapur, Manda, Daksingaon, Damdipara, Signboard, Bhuighar, Jalkuri, and end at Narayanganj Zilla Sadar.

Additionally, its branch line will connect Naya Bazar to Sadarghat via Gulistan, although the feasibility study for this route is still pending.

According to DMTCL, the implementing agency, the construction of the 35 km-long MRT-2 line may cost Tk60,837 crore. However, the final cost will be estimated after the feasibility study.

In addition to the MRT-2, the Commission is considering several alternative options. For instance, the Commission is mulling to exclude the Karwan Bazar section from the MRT-5 (Southern Route). Another consideration is adding a branch line of MRT-2 to Bijay Sharani. Both projects begin from Gabtoli.

In another alternative, the Commission is thinking of constructing MRT-5 (Southern Route) only from Karwan Bazar to Dasherkandi.

A further alternative suggests scrapping the entire MRT-5 (Southern Route) project, with plans to reconsider it if the economic situation improves in the future.