China asked to finance ML-I project

Beijing seeks upward revision in cost of railway scheme

Shahbaz Rana April 27, 2022
The minister pointed to the shortage of water in Karachi and asked the Chinese official to collaborate in establishing desalination plants in the city. photo: reuters


Pakistan on Tuesday again requested China to consider financing the single largest China-Pakistan Economic Corridor (CPEC) project – the $6.8 billion Mainline-I (ML-I) project – after the Railways Ministry disclosed that Beijing was not willing to fund the scheme due to objections over the approved cost.

The request was made by Planning Minister Ahsan Iqbal in a meeting with the Chinese Charge d’ Affairs to Pakistan Miss Pang Chunxue.

Iqbal also assured the Chinese diplomat that his government would resolve issues of a delay in payments of Rs300 billion to Chinese independent power plants (IPPs), which led to shutting down 1,980 megawatts generation capacity.

Miss Pang assured Iqbal that her government would consider the proposal to fund the ML-I project during the review meetings, said an official of the ministry.

After resuming office, Ahsan Iqbal held the first CPEC review meeting last week and took many decisions to put the CPEC back on track. During the meeting the Ministry of Railways had informed that “the PC-I of the ML-I project was not feasible as costs were not agreeable to the Chinese side”, showed the documents.

Iqbal had also directed to bring the matter of Chinese concerns to the knowledge of the new Minister for Railways Khawaja Saad Rafique and also sought a detailed report.

The construction of the ML-1 project in three phases had been approved by the Executive Committee of the National Economic Council (ECNEC) in its meeting held in August 2020.

The actual cost of the project was $9 billion initially, including the equity amount of the government of Pakistan. But later, it was reduced gradually to $6.8 billion, which was not liked by the Chinese side. In March last year, Beijing also conveyed its concerns about Pakistan’s ability to repay the $6 billion debt for the ML-I project. China also highlighted the dilapidated financial condition of Pakistan Railways that does not allow it to take $6 billion in new debt on its books.

Pakistan’s public debt had jumped to 87.2% of the gross domestic product (GDP) at the end of the last fiscal year and the country is consuming over 60% of tax revenues in debt servicing.

It was 72.5% of the GDP when the PML-N tenure ended about three years ago. After rebasing the economy, the debt-to-GDP ratio dropped to 72% as of last year.

The ML-I project includes dualisation and upgrading of the 1,872-km railway track from Peshawar to Karachi and is a major milestone for the second-phase of CPEC and its construction is facing a delay of over four years.

The negotiations to secure the loan have been going on for the last over two years but so far no conclusion has been reached.

The project is facing delays of over four years against the original schedule agreed between the two countries.

Pakistan wants to expand and modernise its dilapidated rail infrastructure through $7 billion Chinese investment. But the project is facing delays due to lack of financial closure of the project.

“My top priority is to expedite the CPEC projects to restore the confidence of the Chinese investors,” said the Minister during a meeting with Pang Chunxue, Chinese Charge d’ affairs. Miss Pang Chunxue appreciated the steps taken by the minister since he took charge of the ministry.

The minister stressed that the incumbent government will maintain a lasting working relationship with China in the same spirit as it was in 2013.

This is unfortunate that during the last four years there were no Special Economic Zones (SEZs), which led to a downturn in investment from Chinese investors, said Iqbal.

During the meeting, the minister also said that Prime Minister Shahbaz Sharif had already requested China to add the Karachi Circular Railway (KCR) project in CPEC.

The minister also urged the Chinese official to resolve the issues of Pakistani students studying in China. In this connection, 200 students are being issued visas so that they complete their studies in China. Similarly, the minister also suggested that Pakistan and China should start working on Space Technology and said that Pakistani astronauts should be given the opportunity to go to space with the Chinese.

This act will further take the relationship between the two countries “to new heights higher than the skies”, he added.

The minister pointed to the shortage of water in Karachi and asked the Chinese official to collaborate in establishing desalination plants in the city to overcome the paucity of clean drinking water.

Miss Pang assured to extend full support of China to uplift the water-related projects, according to a statement issued by the Planning Ministry.

Published in The Express Tribune, April 27th, 2022.

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