About 10mn people will breathe easier in Dhaka, Bangladesh, as a result of an Asian Development Bank (ADB) loan package totalling US$72.6mn equivalent approved to fund the conversion of thousands of the city’s vehicles to run on cleaner fuel.


The Dhaka Clean Fuel Project will:


    • Lay 60km of natural gas transmission pipeline between Dhanua and Aminbazar, Savar, and two city gate stations at Ashulia and Savar.


    • Construct 97km of pipelines to improve distribution of natural gas in Dhaka.


    • Establish six large and 20 small compressed natural gas (CNG) filling stations around Dhaka.


    • Purchase 10,000 CNG conversion kits for petrol-driven vehicles as well as 300 CNG-fuelled buses and 2,000 CNG-fuelled auto rickshaws.


    • Set up three workshops to convert vehicles to CNG, and conduct repairs and maintenance.


    • Carry out technology development and training in the workshops, bring in new safety codes, standards, and regulations on the use of CNG for transport.


  • Carry out public promotion campaigns.

The private sector will absorb the major portion of the initial supply of CNG buses and all of the auto rickshaws. Financing will be provided through commercial banks and/or leasing companies. The CNG filling stations, meanwhile, will be initially procured by Rupantarita Prakritik Gas Company Ltd (RPGCL) in existing filling stations and operated by private operators for a gradual transfer of ownership.

Air pollution has become a serious health problem in urban Bangladesh. A significant amount arises from emissions from poorly maintained vehicles and two-stroke fumes from auto rickshaws.

A pilot programme to establish CNG use in Dhaka started in the early 1980s, but gas shortages as well as lack of maintenance and service support have hindered its adoption.

“The whole of Dhaka will benefit from this project, but especially the poor, as they are most exposed to the health risks from air pollution,” says Mats Elerud, ADB energy specialist. “Use of more domestic natural gas resources will mean less liquid fuel has to be imported.”

The total cost of the project is estimated at US$113.4mn equivalent. The Nordic Development Fund will provide co-financing of US$9.3mn and the government and sector agencies will finance US$31.5mn.

The ADB is providing two loans for the project. The first is for US$42.4mn equivalent from the concessional Asian Development Fund with a term of 32 years including a grace period of eight years. Interest is 1% per annum during the grace period and 1.5% per annum subsequently.

The second is for US$30.2mn from the ADB’s ordinary capital resources with a 20-year term, including a grace period of five years. Interest is determined in accordance with ADB’s Libor-based lending facility. There is a commitment charge of 0.75% per annum and a front-end fee of 1%.

The executing agencies for the project, which is due for completion by end-2006, are Titas Gas Transmission and Distribution Company, the Gas Transmission Company Ltd and RPGCL.