ISLAMABAD: The federal government on Wednesday approved the construction of Sukkur-Hyderabad motorway at a cost of Rs182 billion in partnership with the private sector, potentially saving Rs50 billion compared with a road scheme completed under the China-Pakistan Economic Corridor (CPEC).
The Central Development Working Party (CDWP) recommended the 306-kilometre project to the Executive Committee of National Economic Council (Ecnec) for undertaking it under the public-private partnership (PPP) mode, stated the Ministry of Planning and Development.
The per-kilometre construction cost of the six-lane motorway is Rs596.4 million compared with the cost of Rs760 million for the Sukkur-Multan motorway built under CPEC, according to the Ministry of Planning.
The Sukkur-Multan motorway had been built under a government-to-government deal between China and Pakistan. Compared with the Sukkur-Multan project, the Sukkur-Hyderabad project’s per-kilometre construction cost is Rs164 million or 21.5% lower. In terms of total project cost, it translates into savings of Rs50 billion.
At CPEC project rates, the Sukkur-Hyderabad motorway would have cost Rs232 billion. The project will now be placed before the Public-Private Partnership Authority for approval. After being approved by the PPP Authority, the National Highway Authority (NHA) will float tenders for competitive bidding.
The project had to be brought for CDWP’s approval due to cross-subsidisation of the toll fee of the Multan-Sukkur motorway. The Sukkur-Hyderabad project was evaluated under various PPP modes. The contractor will build the project on build, operate and transfer mode, known as BOT.
The BOT model with additional component of cross-subsidisation from an already built section of Multan-Sukkur motorway is a viable and bankable option in which case no government subsidy will be required.
About 10% of the total project revenue will be shared with the NHA after the debt servicing period of 10 years. The contractor will recover its construction cost in 10 years and in the next 15 years it will earn profit on the investment. The PPP model is feasible where projects are commercially viable. Headed by Planning Commission Deputy Chairman Mohammad Jehanzeb Khan, the CDWP approved three projects worth Rs12.5 billion and recommended two schemes costing Rs196.6 billion to Ecnec for consideration, including the Sukkur-Hyderabad motorway. The concessionaire will build and operate the facility up to the full concession period as per concession agreement and will hand it over to the NHA after expiry of the agreement. The federal government will provide 4% of the cost at Rs7.4 billion while the remaining Rs182.5 billion will be the responsibility of the private-sector investor.
However, the transport wing of the Ministry of Planning had opposed the proposal to provide Rs7.4 billion from the budget. The CDWP allowed the wing to rationalise the establishment cost component of the project.
Authorities plan to complete the project in two and a half years from the targeted date of commencement of work in November this year.
The completion of Sukkur-Hyderabad motorway will complete the missing link on the eastern corridor. The road will start from Hyderabad end of the Karachi-Hyderabad motorway and will end at the start of the Sukkur-Multan motorway, built under CPEC.
The CDWP approved the building of water supply and sanitation infrastructure in the under-developed area of Punjab at a cost of Rs3.3 billion. The project is aimed at improving water supply and sanitation conditions in Isa Khel tehsil of Mianwali district located on the north-west side of the Indus River bank.
The dualisation of Quetta Western Bypass worth Rs7.1 billion was approved in the CDWP meeting. The project envisages dualisation of the existing two-lane 22.5km-long Quetta Western Bypass to four lanes.
For improvement of the social sector, a project for human development indicators with focus on education-related indicators of Sustainable Development Goals worth Rs3.6 billion was approved by the CDWP. The CDWP has the mandate to approve up to Rs10 billion worth of schemes and refers projects of higher cost to Ecnec, headed by the finance adviser, for final endorsement.
Published in The Express Tribune, April 23rd, 2020.
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