Delays in appointing a consultant and securing the lender’s approval at different stages have pushed back a major rural power substation modernisation project and increased its cost by more than a third.
The Bangladesh Rural Electrification Board (BREB), the implementing agency, is now seeking a two-year extension for the “Renovation and Modernisation of Existing 33/11 kV Pole Mounted Substations of BREB (Phase-1)” project, along with an additional Tk248.64 crore.
The Project Evaluation Committee (PEC) of the Planning Commission met last month to consider the first revision proposal and agreed to recommend it, subject to a set of conditions for BREB.
The revised cost stands at Tk928.37 crore, up 36.58% from the Tk679.72 crore approved in May 2022. Only about 30% of the work has been completed, although the project was originally due to end in June 2026.
PEC backs revision
After detailed discussions, the PEC agreed to recommend the revision, reversing its position from three months earlier.
It endorsed a two-year extension instead of the one year and six months BREB had initially proposed and asked the agency to formally justify the longer period in writing.
The committee made it clear that the extended timeframe must not lead to further cost escalation.
The meeting was chaired by Nurun Nahar Chowdhury, member of the Industry and Energy Division of the Planning Commission.
At an earlier meeting on 8 June, the PEC declined to recommend the revision because of slow progress and instead issued a set of directives. The latest meeting reviewed the steps taken since then.
What held the project back
The project director told the meeting that the appointment of the Project Implementation Support Consultant (PISC) took much longer than planned.
Under the procedures of German lender KfW, the consultant is required to prepare designs, drawings, specifications, bills of quantities and tender documents, with different stages requiring the lender’s clearance, including No Objection Certificates.
The approval process took several months at different stages, delaying the procurement of contractors and subsequent implementation of the project.
Why the cost went up
The revision attributes the cost increase mainly to changes in foreign exchange rates and adjustments across various project components.
Although the foreign loan itself has not increased, its value in taka terms has risen following depreciation of the local currency. As a result, most of the additional cost comes from the KfW-funded portion, which now stands at around Tk726 crore.
The government’s contribution of Tk192.09 crore and BREB’s own contribution of Tk9.93 crore remain unchanged.
Participants at the meeting also stressed the need for a clear account of the loan terms, interest rates and exchange-rate assumptions.
Why two more years
BREB had initially sought an extension until December 2027. However, the project director argued that, considering the pace of implementation so far, a two-year extension would be more realistic. The BREB chairman supported the proposal.
“Since the project has to complete the procurement of contractors, build up field-level work and finish the remaining 70% within the extended period, the committee accepted that a shorter extension would likely lead to a second revision,” said Nurun Nahar Chowdhury.
Conditions attached
The PEC asked BREB to appoint contractors quickly and begin field-level work without further delay.
It directed the Power Division, Economic Relations Division (ERD), development partners and BREB to coordinate closely to prevent further delays, following decisions taken at an ERD meeting chaired by the finance minister on 10 July.
BREB was also asked to resolve outstanding issues with the lender in close coordination with ERD.
The revised proposal must include a detailed account of the loan terms, interest rate and exchange-rate assumptions, along with the financial impact of the taka’s depreciation.
BREB was also instructed to reduce spending on entertainment, stationery, printing and binding, and to cut other costs wherever possible.
The Implementation Monitoring and Evaluation Division (IMED) was asked to closely monitor implementation of the project.
What the project will deliver
The project will renovate and modernise 23 ageing pole-mounted substations under 14 Palli Bidyut Samities in Dhaka, Khulna, Chattogram and Mymensingh divisions.
Distribution capacity is expected to increase from 410 MVA to 530 MVA, while 2,760 km of distribution lines, equivalent to 920 circuit km, will be reconductored.
The average System Average Interruption Duration Index (SAIDI) is expected to fall by 10%, from 551 minutes to 495 minutes, in line with the 2026 election manifesto pledge.
The project is financed by the government, KfW through loans and grants, and BREB’s own resources. Its original implementation period ran from July 2022 to June 2026.