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The Financial Express

Chinese contractor for Padma rail link project faces fund crisis

| Updated: March 03, 2021 14:38:05


Chinese contractor for Padma rail link project faces fund crisis

The Chinese contractor for the Padma Bridge Rail Link Project (PBRLP) alleges that it is facing a fund crisis due to a delay in the payment release by Bangladesh Railway.

"The fund crisis seems to have emerged as an impediment to completing the construction process," China Railway Group Limited (CREC) said in a press release on Wednesday.

The contractor said it has not been paid the payment of six months from July 2020 until January 2021 and the total amount of the pending payment is now around USD 400 million.

In this situation, the CREC said in the press release circulated through its PR agency, it "cannot procure sufficient construction materials and cannot pay subcontractors and suppliers in a timely manner".

The CREC also said, "The time consumed by Bangladesh Railway for processing each interim payment (IP) has been much longer than they had expected".

Here is full text of the press release with the title "FUND CRISIS CAUSING DELAY IN MEGA VENTURE PADMA BRIDGE RAIL" dated February 24, 2021:

The Padma Bridge Rail Link Project (PBRLP) is a mega fast-track project of Bangladesh. The Government of Bangladesh has set a target of opening both rail and road on the Padma Bridge on the same day. However, the fund crisis seems to have emerged as an impediment to completing the construction process. The contractor, China Railway Group Limited (CREC), is thus having to face critical consequences regarding the issue.

CREC information suggests that they received the mobilization payment at the end of June 2018, but due to internal reasons of Bangladesh Railway, CREC did not receive any more payment until September 2020. During this long period, CREC had to borrow huge amounts of commercial loans from banks to continue the project execution.

As per CREC, the time consumed by Bangladesh Railway for processing each interim payment (IP) has been much longer than they had expected. For example, CREC submitted IP7 for the project expenses of June to September of 2020 on October 27, 2020, but it was not until Februrary 9, 2021 that Bangladesh Railway sent to China Eximbank the instruction to release the foreign portion of the expenses while the local portion is till pending due to a lack of planning and coordination of Bangladesh Railway.

Since China Eximbank shall not release the foreign portion before the local portion is paid, CREC has not received any payment of IP7 up to now, 115 days after the submission of IP7. CREC claimed that they have only received the payment for the work completed in and before June 2020, while the payment for the work completed from July 2020 to January of 2021 is still being processed in Bangladesh Railway at a slow pace. The total amount of the pending payment is around USD 400 million. In this situation, CREC cannot procure sufficient construction materials and cannot pay subcontractors and suppliers in a timely manner. Project execution is naturally slowing down, and project costs are increasing day by day.

According to CREC, they shall supply 100 coaches by July 2020, but Bangladesh Railway has not yet given any instruction to start manufacturing those coaches. CREC has repeatedly informed Bangladesh Railway that it takes two years to manufacture and deliver the coaches. CREC has been putting sincere efforts to keep the project going on even amidst COVID-19, but they need support and cooperation from their partners for the smooth and timely execution of the project.

 

 

 

 

 

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