The cost of the electrical infrastructure expansion and strengthening project in Dhaka Electricity Supply PLC (DESCO) area is set to increase by Tk627.24 crore, primarily driven by a sharp rise in foreign exchange rates and delays in securing international financing.
Alongside the budget hike, a proposal has been made to extend the project’s duration by two years, pushing the completion date to March 2028.
The first revision of the project is scheduled to be presented for approval at the Executive Committee of the National Economic Council (ECNEC) meeting on Wednesday.
Implementation agency Dhaka Electricity Supply PLC (DESCO) identified the primary reasons for the cost escalation as the appreciation of foreign currency, delays in signing the Asian Development Bank (ADB) loan agreement, and cost adjustments across various sectors.
The foreign exchange rate hike alone accounts for Tk 565.29 crore of the increase, representing 90.12% of the total budget surge.
Additionally, costs are rising by Tk 95.42 crore due to increased interest during construction, Tk 2.72 crore because of the timeline extension, and Tk 5.67 crore due to rising market prices.
Conversely, expenses in certain segments were reduced by Tk 41.87 crore following a decrease in work scope and lower actual costs.
Forex fluctuations, revised funding structure
According to data from the Planning Commission, the project’s initial estimated cost was Tk2,272.48 crore. Under the first revision, this figure is rising to Tk 2,899.72 crore, an increase of 27.60% over the original budget.
While the government’s share is decreasing from Tk446.50 crore to Tk442.17 crore, the ADB loan is proposed to increase from Tk1,231.54 crore to Tk1,951.17 crore. DESCO’s own funding contribution will drop to Tk506.38 crore.
DESCO’s proposal highlights that the foreign exchange rate had a major impact on the budget, as the original project used a lower exchange rate for foreign loans.
The revised proposal calculates costs based on the rates as of 23 November 2025, setting the US dollar at Tk122.59 and the Chinese yuan at Tk17.25. Furthermore, the delay in the ADB loan agreement was a key factor in extending the project duration.
Although ECNEC approved the project on 5 April 2022, the loan agreement with the ADB was only signed 21 months later, on 2 January 2024, becoming effective on 1 April that year.
Financing debates, timeline extension
The project proposal notes that after approval, the ADB suggested blended financing, but the Power Division requested the project be implemented solely under sovereign financing.
The agreement was eventually signed after lengthy discussions between the ADB and the government regarding the financing model. Originally planned to conclude in four years (April 2022 to March 2026), the implementation period is now proposed to span six years, ending in March 2028.
Under the project, four 132/33/11 kV grid substations will be built in Airport, Kalshi, Bashundhara, and Tongi, while four 33/11 kV distribution substations will be constructed in the Baridhara Diplomatic Zone, Mirpur, Tongi, and Purbachal.
Infrastructure scope, service improvements
The scope also includes the installation of 27 kilometres of double-circuit 132 kV underground transmission lines, 50 circuit kilometres of 33 kV and 100 kilometres of 11 kV underground cables, and 150 kilometres of 11/0.4 kV overhead distribution lines.
DESCO states that upon completion, its power distribution capacity will increase by 595 MVA. The project aims to provide two lakh new electricity connections and ensure reliable supply for one lakh existing consumers, while reducing system losses from 5.58% to 5.25%.
Recommending the revision, the Industry and Energy Division of Planning Commission stated that the project will enhance the capacity and reliability of the electricity distribution system in the DESCO area.
This will help meet Dhaka’s growing power demand and ensure stable supply for both new and existing customers.
