Russia, UAE pledge $1bn investment in railway

Pakistan is set to receive an investment of up to $1 billion in its struggling railway sector, with both Russia and the United Arab Emirates (UAE) expressing interest in modernising the infrastructure.

Sources revealed that ongoing negotiations between Pakistan and the two nations have been focused on fostering collaboration within the railway sector, a crucial move given the neglect by previous administrations that has left the sector in dire straits for decades.

Once a lucrative enterprise in goods transport, Pakistan’s railway sector faced setbacks as the tanker mafia grabbed and monopolised the entire business.

The Pakistani government is now working on upgrade projects, drawing the interest of Russia and the UAE, both expressing eagerness to invest in the sector.

The two countries have developed plans to invest as China has also been actively seeking investments in the railway sector.

Sources said that Russia has committed to investing between $550 million and $660 million for the upgrade of the Quetta-Taftan railway line in the Balochistan province.

The agreement was reached during a visit by the federal minister and secretary of railways to Russia on December 8, 2023. Now, two sides are working to sign the G2G framework agreement in this regard.

The higher-ups in the federal government had tasked the Pakistani ambassador to Russia to follow up on the progress of the investment plan. The Pakistani government had successfully managed to import oil from Russia for the first time, which was viewed as a strategic move to enhance economic relations with Russia.

The Russian government had already expressed interest in investing in the revival of a distressed unit of Pakistan Steel Mills (PSM) during the PTI government. In addition, it aims to invest in power plants in Pakistan, particularly to modernise older power facilities.

Meanwhile, the Gulf state of Dubai is also considering an investment of $350-400 million for the construction of a dedicated freight corridor in Pakistan.

The UAE was already investing in Pakistan, with both countries signing an agreement to attract investment in a port terminal in Karachi. Now, Dubai is exploring the possibility of investing up to $400 million in the railway sector.

The UAE had agreed to invest in the construction of the dedicated freight corridor (DFC) and a multimodal logistic hub at Pipri. Pakistan had also received a draft framework agreement, and work was underway on a government-to-government (G2G) basis.

UAE is also a strategic investment partner of Pakistan, involved in a joint venture with the Pakistani government for a mega refinery in the country.

Short term

The government has devised a plan to rationalize Railway track crossing charges along with the along-the-track charges.

Additionally, a proposal has been made to set the rates for cable TV operators using Railway bridges/culverts at a lump sum ranging from Rs2,500 to Rs25,000 for 5 years, and these rates should also apply to telecom operators.

The Ministry of Information Technology was assigned the responsibility of conducting a consultative process to finalise the enforcement mechanism.

The government has also instructed relevant officials to supervise the harmonisation process of ROW rates.

Long term

Under the long-term plan, the government aims to implement the Thar Railway Connectivity Project for the transportation of coal to power plants.

The PC-1 was approved by ECNEC on December 11, 2023, and the EPC documents were finalised. The draft of the finance facility agreement (FFA) was referred back to the Railways Ministry and the Government of Sindh on December 27, 2023.

The Sindh government will review its decision in compliance with the ECNEC decision and sign the financing agreement. The proposal to connect Thar with the railway track was initially introduced during the previous government of PTI.