$8.2b railtrack upgrade project wins go-ahead

Published: June 9, 2016
Email
At present, Pakistan Railways is picking up less than 4% of the traffic volume of the country. PHOTO: ONLINE

At present, Pakistan Railways is picking up less than 4% of the traffic volume of the country. PHOTO: ONLINE

ISLAMABAD: Pakistan on Wednesday cleared, in principle, two strategically important $10 billion projects for upgrading a mainline of the Pakistan Railways to smoothen the China-Pakistan Economic Corridor (CPEC) traffic, and construction of a gas pipeline.

The Central Development Working Party (CDWP) gave the necessary nod to both the projects ahead of loans negotiations with Chinese authorities. China will provide loans for both the projects equivalent to 85% ($8.5 billion) of the cost of each project.

Pakistan to lay modern rail tracks for trade with Afghanistan, Iran

According to the project documents, the cost of upgrading of Pakistan Railways existing Mainline (ML-I) and establishment of a dry port near Havelian is $8.2 billion, which the Chinese government will finance with a $7 billion concessionary loan.

This project is part of $46 billion CPEC package and is covered under the CPEC Framework Agreement, signed during the April 2015 visit of Chinese president to Pakistan.

The estimated cost of Gwadar-Nawabshah LNG Terminal & Pipeline project, also cleared in principle, is $2 billion including $1.4 billion Chinese loan. This project is strategically important for Pakistan as it will eventually link the country’s gas network with Iranian system.

“The exact costs of both the projects will be firmed up after finalising financing arrangements,” said CDWP Chairman and Minister for Planning Ahsan Iqbal while talking to The Express Tribune.

He said in order to finalise the financing arrangements, the approvals of the PC-Is of both the projects were necessary. “After finalisation of the financing arrangements, both the projects will be taken to the Executive Committee of National Economic Council (Ecnec) with firmed up cost for final approval,” he said.

ML-I project

The ML-I project has been planned under the CPEC Framework. The $8.2 billion worth PC-I has been prepared on the basis of joint feasibility study carried out by a consortium of firms, namely, M/s Creec of China and M/s Nespak and M/s Pracs of Pakistan.

Railways receives defective locomotives from Chinese firm

As per understanding given by M/s Creec, 15% of the total cost of the project will be borne by Pakistan and 85% will be financed from relevant Chinese financial institutions under CPEC framework.

At present, Pakistan Railways is picking up less than 4% of the traffic volume of the country, which the government intends to increase to at least 20% by 2025.

The project envisages upgrading of the railways existing mainline from Karachi to Peshawar having total length of 1,872 km including 91 km Lodhran-Khanewal section and 55 km Taxila-Havelian section.

The major scope of work will involve 1,598 km upgrading of existing double and single track and overhauling of 930 km existing double line. The construction of 676 km new track from Lalamusa to Peshawar including Karachi-Kotri/Hyderabad with UIC-60 rail, construction of tunnels, bridges and culverts along with allied structures and facilities for 25 ton axle load capacity as opposed to existing 22.86 ton permissible axle load are also part of the project.

The project is planned to be completed in two phases in five years by 2021 on engineering, procurement and construction (EPC) mode. Phase-I will be completed by December 2017 and Phase-II by the year 2021.

LNG pipeline

The CDWP also cleared Gwadar-Nawabshah LNG Terminal and Pipeline Project at an estimated cost of roughly $2 billion or Rs206.6 billion.  The cost includes $1.4 billion Chinese loan.

The Chinese Exim bank will provide 85% of the financing under government-to-government mode. The EPC contract will be given to a Chinese company. The pipeline project will be included in the CPEC framework, according to the documents.

The key objective of this project is to overcome gas shortages by importing LNG and its transportation through Gwadar-Nawabshah pipeline.

Pakistan Railways prepares for tougher challenges ahead

The issue as to whether the implementing agency or the federal government would sign the financing deal with Chinese counterparts remains unaddressed.  Another outstanding issue is whether the Exim bank will extend loan at 6% interest rate or 4% rate for this project.

In phase-I, the pipeline will follow the coastal pipeline corridor, which was formally established for the Iran-Pakistan gas pipeline. In phase-II, a 90-kilometer patch will be constructed from Gwadar to Pakistan-Iran border to tie the national network with Iranian system.

The project will be completed in EPC turnkey mode in two years. The financial analysis of the project reveals that the project will be viable, if it operates at its full designed capacity of 1500 mmcfd gas.

Published in The Express Tribune, June 9th, 2016.

Facebook Conversations

Reader Comments (34)

  • AK
    Jun 9, 2016 - 8:46AM

    This information needs vetting, usually costs $2.0 to $2.2 Million/Km. Even if you double the mainline, the project should not cost more than $6.5 Billion.Recommend

  • fahim
    Jun 9, 2016 - 10:00AM

    loans, loans and more loans… china is eating into our economy and we are gladly giving out our assets. CPEC will only serve the clever chinese, we will get lollipops in return. I can vouch all contract of this loan, will go to chinese companies, to bring their products, their labor and take the profits back to their country. We are acting like a colony of chinese here..Recommend

  • leela4fun
    Jun 9, 2016 - 10:35AM

    OK, so projects worth $10B have been announced. Remaining $36B awaited. Why do I get the feeling that there will be more announcements of projects and the total is probably going to exceed $46B?Recommend

  • Mahakaalchakra
    Jun 9, 2016 - 10:39AM

    How many jobs to Pakistanis? Almost none Recommend

  • Syed Ahmed
    Jun 9, 2016 - 11:11AM

    This is good news.

    Can someone confirm that we are laying tracks which are future proofs for at least 30 years?
    What I mean to ask, can we run high speed trains on these tracks in future?Recommend

  • Whatacountry
    Jun 9, 2016 - 11:20AM

    Time for a quick buck!Recommend

  • Lolz
    Jun 9, 2016 - 11:21AM

    Dear ET, please also share the interest rates of these loans as the burden is borne by the citizenry. Moreover Sost Dry-port located in upper Hunza (Gilgit-Baltistan) is being shifted to Havalian which was launched as a Pak-China joint venture back in early 2000’s. Recommend

  • abood
    Jun 9, 2016 - 11:23AM

    Good work PMLN.we need more development.those criticising on the issue of loans should know that this is how the system works in all the countries and kindly all of you have a check on your parents if they have filed for taxes.the answer will be NO.so please let us develop and dont be so negative.development will create economic opportunities which we need badly.Recommend

  • brar
    Jun 9, 2016 - 11:27AM

    @AK: include commission ok.Recommend

  • Wow ahmed
    Jun 9, 2016 - 11:40AM

    The country needs the infrastructure but not at these rates and with no international bidding or quality control.

    Chinese imports will get to us us quicker and cheaper. What will we export to China that we don’t now?Recommend

  • Fast
    Jun 9, 2016 - 11:41AM

    This project will is a great step towards prosperity and progress of Pakistan. Railway network consider best for inland transport. Pmln keep it up!Recommend

  • Fast
    Jun 9, 2016 - 12:25PM

    @AK:
    You estimates maybe true where there are no hilly areas or for only plan areas. In pak there are hilly areas so cost will be high. And also in this 8.2bn$ package a large dry port will be built at haveilian.Recommend

  • SHAH
    Jun 9, 2016 - 12:31PM

    @AK:
    Balance is commissions and kickbacks to NS and family. Recommend

  • SHAH
    Jun 9, 2016 - 12:31PM

    @Mahakaalchakra:
    Jobs for WHO ???? Recommend

  • azmat
    Jun 9, 2016 - 12:54PM

    @fahim:
    I am no fan of Nawaz Shareef but this CPEC thing is very important to Pakistan. Even if we ignore the financial benefits, it still hold a strategic importance from security point of view, especially in the evolving regional politics. China will have a lot more stakes in Pakistan and hence could ill afford an unstable Pakistan. The more a country is reliant on you, the more likely you will find it on your side in difficult times- simple as that. We need to do the same with Iran as well. if we increase mutual trade, it would translate in to commom interests. But the foreign ministry needs to get the act together. Recommend

  • vinsin
    Jun 9, 2016 - 1:11PM

    @Syed Ahmed:
    No the tracks are not for bullet trains if that is what you meant, the max speed attenable would be 160 km/hr. Also currently Pakistan dont have economy for bullet trains as they are very expensive and tickets are costly too.

    https://en.wikipedia.org/wiki/China%E2%80%93PakistanEconomicCorridor#Railwayinfrastructureprojects

    The interest loan for railway projects in 2.4%. It is a net benefit project for Pakistan. The benefit will only start after 2030 and by that time Pakistan would be part of Chinese territory.Recommend

  • Jun 9, 2016 - 1:22PM

    Good news for Pakistan. Pakistan could not build even 1 km of railway line after independence. Recommend

  • irfan
    Jun 9, 2016 - 1:25PM

    @Mahakaalchakra: Labor force will come from India ?Recommend

  • sabi
    Jun 9, 2016 - 5:02PM

    You see if civil and military unite together great economic miracle happens. Pakistan is going to be a great country under pmln.Pakistan Tera Khuda khafiz.Recommend

  • Tyggar
    Jun 9, 2016 - 9:52PM

    @vinsin:
    The interest loan for railway projects in 2.4%
    Isn’t Japan giving loan to India for the bullet train at 0.5% interest even though India and Japan’s relationship is not taller than Himalayas, sweeter than honey, deeper than oceans or stronger than the strongest steel. Plus they are not even insisting on using Japanese laborRecommend

  • Darvesh
    Jun 9, 2016 - 11:40PM

    @Tyggar:
    “The interest loan for railway projects in 2.4%
    Isn’t Japan giving loan to India for the bullet train at 0.5% interest even though India and Japan’s relationship is not taller than Himalayas, sweeter than honey, deeper than oceans or stronger than the strongest steel. Plus they are not even insisting on using Japanese labor”

    India gets loan at nominal rates because of poverty ,Pakistan doesn’t fall into that category hence normal rates apply.Recommend

  • Jun 10, 2016 - 2:26AM

    Where is the money?Recommend

  • hamza khan
    Jun 10, 2016 - 3:03AM

    @Mahakaalchakra:
    actually a lot. several thousand at a time. need burnol? hahahaRecommend

  • Jun 10, 2016 - 3:53AM

    Need to start new economic architecture by excluding Ribba(Interest). Recommend

  • BigFact
    Jun 10, 2016 - 4:14AM

    Even if all of the stated negative points come true, CPEC would still be in Pakistan and benefit it tremendously InshaAllah. I’ve no doubt in my mind that most of the negativity being spread is by the Indians, (mostly using fake names). The reason is obvious.
    We Pakistanis are united in supporting all development in Pakistan, and reject all negativity. Recommend

  • vinsin
    Jun 10, 2016 - 10:19AM

    @Tyggar:
    Japanese loan for high speed railways (350km/hr) is at 0.1% for 50 yrs. India was highly anti-Japan during Nehruvian era and created North Korea for that. Pakistan has taken loan from China to make railways and buy and pay expensive Chinese labor for that. If Chinese labor factor taken into account then the interest rate doubles i.e 4.8% and for India that would be 0.25%. Labor angle is a good point, that doubles overall interest rate for CPEC from 5.5-6% to 10.5-11% at much higher rate than the market available of 8.5% for Pakistan (The higher cost of electricity already factored).Recommend

  • Karachiwala
    Jun 10, 2016 - 10:38AM

    I don’t mind becoming a Chinese colony, the reality is we are a colony to Army. The common man from Peshawar to Karachi has no stake or any share in the state. so it doesn’t matter who rules eventually due to heavy debt which the masses have absolutely no idea Pakistan either bankrupt or taken over by China. Recommend

  • Jun 10, 2016 - 12:24PM

    @hamza khan:
    How do u guys live in 10-12 hours of power cuts. I think it affect your brains a lotRecommend

  • sulaiman
    Jun 10, 2016 - 1:54PM

    its obviously a billion dollar exotic project, having very important for paktan, but the question is it possible to prevent corruption and malfeasanceRecommend

  • Tyggar
    Jun 10, 2016 - 2:18PM

    @Darvesh:
    *India gets loan at nominal rates because of poverty ,Pakistan doesn’t fall into that category hence normal rates apply.*

    You are right, India is still poor compared to the western world, so is China for that matter. However Pakistan is not just poor, it is Bankrupt. Bankrupt and failed countries always get loans at higher interest rates due to the high risk of default.Recommend

  • Tyggar
    Jun 10, 2016 - 2:21PM

    @BigFact:
    mostly using fake names

    Is BigFact your real name? If yes, then I feel sorry for youRecommend

  • Omar Sadiq
    Jun 10, 2016 - 3:42PM

    @Ayush: The same as you guys get your RSS training. Seems like the more you criticize us, the stronger it makes the common man in Pakistan strong. Please remember one thing, the people and the Army & its agencies are NOT like the corrupt and sold-out politicians of Pakistan.Recommend

  • Darvesh
    Jun 10, 2016 - 6:42PM

    @Tyggar:
    Noop, I know Japanese style of donation. They wouldn’t give donations straightaway to poor countries just not to hurt their egos. They give it in the form of a loan with negligible mark up. Consider for example the case of Bangladesh, the extreme poverty prompted rich countries to open their doors for that country export without tarif and trade regulations. Pakistan on the other hand has no such issue as extreme poverty hence it has to compete for trade and loans like a normal country. India is not only poor compare western countries it is indeed poorer than Pakistan. Few billionaires dont necessarily depict the prosperity level of a country.
    Stop living in delusions and start fighting povert which is your biggest enemy.
    Pakistan is a rich country, Low export and not much foreign reserves speaks for that.Recommend

  • Saeed IqbalnKhan
    Aug 3, 2016 - 8:15AM

    This is a very good project, it’s a game changer. GOP, Pak Army and GOC are on one page. Rehabilitation of track has been highlighted in the report, beside this other departments such as locomotive, rolling stock, Electric Traction, Signaling, Telecommunication and other service providing units are also playing vital role in enhancement of safety, line capacity & punctuality of train operations. The same be included in the report to clear the position to all stack holdersRecommend

More in Business