In a rare break from Bangladesh’s long-standing pattern of escalating development costs, a major power sector project has returned to the Planning Commission with a reduced budget, offering a modest but notable counterpoint to the country’s chronic cost overruns.
The Planning Commission’s Project Evaluation Committee (PEC) has recommended approval of the second revision to the South-West Transmission Grid Expansion Project, lowering the total estimated cost to Tk 4,188.67 crore — down Tk 133.68 crore, or 3.09 percent, from the first revised cost.
The proposal will now be placed before the Executive Committee of the National Economic Council (Ecnec) for final approval.
The PEC meeting, held on June 8, was chaired by Dr Nurunnahr Chowdhury, Member (Secretary) of the Industry and Power Division of the Bangladesh Planning Commission.
A Rare Reversal
In Bangladesh’s public investment landscape, project revisions almost invariably lead to higher costs, often driven by delays, design changes and procurement inefficiencies. Against this backdrop, a downward revision — even a modest one — is highly unusual.
Officials said the cost reduction reflects favourable tender outcomes and adjustments based on actual expenditure needs as the project nears completion.
Project Scope and Importance
Implemented by Power Grid Bangladesh PLC under the Power Division, the project aims to strengthen electricity transmission capacity across the south-western and northern regions.
It is designed to meet rising residential and commercial electricity demand, ensure reliable power supply to agricultural operations in Rajshahi, the country’s largest crop-producing region, support a planned economic zone in Barishal
The project includes construction of over 104 km of 400 kV transmission lines, around 350 km of 230 kV lines, nearly 176 km of 132 kV lines, three 400 kV and two 230 kV substations along with expansion of six transmission bays.
Long History of Revisions
Originally approved in June 2018 at a cost of Tk 3,273.88 crore, the project was scheduled for completion by June 2023.
A first revision in March 2023 raised the cost sharply to Tk 4,322.35 crore and extended the deadline to December 2024. Subsequent extensions pushed the completion timeline first to December 2025 and then to June 2026 without further cost escalation.
The latest revision retains the June 2026 deadline — which has effectively already arrived — while slightly reducing the overall cost.
What Drove the Cost Reduction
Project officials told the PEC that several contract packages were awarded below initial estimates, generating savings that offset cost increases elsewhere.
In one package, civil construction costs exceeded projections, but overall package expenditure remained below the approved budget due to lower costs in other components.
However, exchange rate pressures moved in the opposite direction. Since 2023, the depreciation of the taka has increased the local currency cost of foreign-funded components, even though actual dollar spending has not risen.
The first revised project document had assumed exchange rates of Tk 85.60 per dollar up to September 2022 and Tk 100 up to December 2024 — levels that have since been overtaken by market realities.
Officials said the fact that total costs still declined despite exchange rate pressures suggests that underlying savings were larger than the net reduction indicates.
Payment and Completion Assurances
With the project nearing closure, the PEC sought clarification on contractor payments. The project director assured the committee that all running bills would be settled by June 2026.
Retention payments will be cleared during a three-month wind-up period extending to September 2026, in line with the loan agreement with the Asian Development Bank (ADB).
No payment disruptions are expected, officials said, noting that discussions with the lender have already been completed.
Post-Completion Operations
After completion, all assets — including substations and transmission lines — will be handed over to Power Grid’s Grid Maintenance Division, which has already begun operating commissioned components.
Awaiting Final Approval
With PEC clearance secured, the revised proposal now awaits Ecnec’s final nod — the last step before formal closure of the project.
If approved, the project will conclude after eight years, multiple deadline extensions and two formal revisions — but notably, without seeking additional funds at the final stage, marking an uncommon departure from the norm in Bangladesh’s development spending.