Dar defers $6.7b CPEC rail project

Directs Railway Division to revise project summary with detailed financing plans


Our Correspondent July 06, 2024
The Railways Division submitted the ML-I project summary to ECNEC without arranging finances from the Public Sector Development Programme, China, or any other international financial institution. Photo: AFP

print-news
ISLAMABAD:

Deputy Prime Minister Ishaq Dar announced on Friday that the Executive Committee of the National Economic Council (ECNEC) deferred approval of the $6.7 billion Mainline-I (ML-I) project of the China-Pakistan Economic Corridor (CPEC) due to the lack of secured financing.

Speaking to The Express Tribune, Dar said that as chairman of ECNEC, he instructed the Railways Division and relevant authorities to present a fresh summary with financing details and to divide the project into packages.

Dar’s statement came a day after the planning ministry unusually contradicted an official statement from the deputy prime minister’s office regarding the approval of the ML-I project. The planning ministry clarified that ECNEC did not defer the approval of the ML-1 project under CPEC, attributing the discrepancy to a misunderstanding.

However, Dar reaffirmed to The Express Tribune that the project was deferred and sent back to the department for further refinement. Pakistan’s existing rail track from Karachi to Peshawar is dilapidated and prone to accidents, prompting the government to seek refurbishment and reconstruction assistance from Chinese authorities. The ML-I project was part of the first phase of CPEC and received Pakistan’s initial approval two years ago at a cost of $9.9 billion. However, China objected to the high cost due to Pakistan’s economic vulnerabilities and requested a reduction. Last month, the government reduced the cost by one-third to $6.7 billion, but secured financing to start the project is still lacking.

The Railways Division submitted the ML-I project summary to ECNEC without arranging finances from the Public Sector Development Programme, China, or any other international financial institution. The original 1,872-kilometre ML-I track proposal has been reduced to 1,726 kilometres.

Unlike in the past, when the ECNEC was chaired by the finance minister, Dar chairs the ECNEC meeting in his capacity as deputy prime minister, a role assigned to him by Prime Minister Shehbaz Sharif, who retained the chairmanship of ECNEC but appointed Dar as its alternate chairman. The statement about the ML-I was issued by his office. The planning ministry clarified that during a recent meeting in Beijing, the Prime Minister of Pakistan and President Xi Jinping agreed to advance the ML-1 project in phases.

China has expressed willingness to finance the first phase, from Karachi to Hyderabad, worth over $1.1 billion. Pakistan, however, is trying to secure financing for the Karachi-Multan segment, costing approximately $3.3 billion. Instead of submitting the PC-I for the first phase, the Railways Division presented the $6.7 billion PC-I. Dar directed the Ministry of Railways to resubmit their PC-I for Phase-1, covering the Karachi-Multan section.

ECNEC has the mandate to approve mega development projects worth over Rs7.5 billion. The revised cost of the ML-I project is $6.7 billion, or Rs1.9 trillion, and is considered strategically important. Pakistan has requested a loan covering 85% of the project cost from China, but the Chinese authorities have not yet agreed to the concessional loan, and the terms remain under discussion. Pakistan is urging China to initiate the bidding process for the ML-I project and hold a joint financing committee meeting to finalise the loan terms.

Previously, the Planning Commission assessed the ML-I project as “unviable” due to cost reductions that significantly altered its design and scope, citing compromises on speed limits, line capacity, rolling stock, axle load, and the removal of the fencing plan.

 

COMMENTS (2)

Concerned | 2 weeks ago | Reply Without getting a huge chunk as commission Ishaq Dharia will not let the ML1 project start
sareer | 2 weeks ago | Reply In my humble opinion securing loan of this magnitude will further burden our weak economy. It may be delayed till the time our economy is strong enough. Moreover if I am not wrong railway is on the privatization list then why we are burdening it. This is my personal opinion which may be wrong.
Replying to X

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see our Comments FAQ