Freight corridor deal rejected

The Cabinet Committee on Inter-Governmental Commercial Transactions (CCOIGCT) has refused to approve a draft commercial agreement between Pakistan Railways and a United Arab Emirates (UAE)-nominated entity and has directed the Railways Division to explore domestic financing alternatives.

The draft commercial agreement has been proposed between DP World of Dubai and Pakistan Railways.

The Ministry of Railways briefed the cabinet body, in a recent meeting, that the government of Pakistan (represented by the Ministry of Railways) and the government of Dubai (represented by Ports, Customs and Free Zone Corporation) had signed an inter-governmental framework agreement for investment and construction of a dedicated freight corridor, including a multimodal logistics park and the development of tail freight terminals on the railways network.

The cabinet committee considered a summary titled "Approval of draft commercial agreement", which was submitted by the Ministry of Railways, but did not approve the proposal.

It directed the Railways Division to explore financing alternatives based on domestic resources and with a view to assessing the possibility of joint financing with the Ministry of Maritime Affairs and Karachi Port Trust (KPT) for the above project.

The Railways Division submitted two proposals, including a draft commercial agreement as negotiated between the two sides and recommended by a negotiation committee for approval by the cabinet committee. It also sought approval of exemption from procurement and competition laws in accordance with Section 5 of the Inter-Governmental Commercial Transactions Agreement.

Sources told The Express Tribune that the committee discussed a proposal submitted by the Railways Division aimed at alleviating congestion to facilitate the smooth movement of trade cargo.

After detailed deliberations, the committee decided that, given the relatively modest financial requirement for the project ($20 million), it should be financed through domestic resources rather than relying on foreign funding.

It noted that several alternatives could be explored for domestic financing such as public-private partnership or offering the project to well-known domestic investors.

Since the main beneficiary of the project would be KPT, a business and financing plan could be developed in collaboration with port authorities and the Ministry of Maritime Affairs, it said.

The committee observed that foreign funding should only be sought in cases of mega development projects, which were not possible to be financed through indigenous resources alone.

Earlier, the CCOIGCT had approved the establishment of a negotiation committee to discuss a commercial agreement and variables and parameters for a price discovery mechanism during its meeting held on February 1, 2024. The decision of CCOIGCT was ratified by the cabinet on February 5, 2025. In a Special Investment Facilitation Council (SIFC) huddle on October 28, 2024, attended, among others, by representatives of DP World and Pakistan Railways, it was decided that the project would be executed in two phases. Hence, the draft commercial agreement pivots around phase-I of the dedicated freight corridor.

Subsequently, a series of meetings of the negotiation committee were held between February and June 2025. Broad terms and conditions were mutually agreed between the two parties.

The approval of CCOIGCT was solicited for the proposal contained in para-3 of the summary in order to proceed further on the framework agreement in accordance with the Inter-governmental Commercial Transactions Agreement.