Agreement on freight corridor revised

Under exit clause, Pakistan Railways gets right to buy back concessionaire's assets

ISLAMABAD:

The government has revised a draft commercial agreement on the dedicated freight corridor that gives Pakistan Railways the right to buy back assets.

Sources told The Express Tribune that a meeting of different stakeholders, chaired by Deputy Prime Minister and Foreign Minister Ishaq Dar, decided that the Railways Division would limit the timeframe for signing a phase-II commercial agreement. It was agreed that the phase-I commercial agreement would be revised by adding an exit clause whereby Pakistan Railways would have the right to buy back the concessionaire's assets at the net book value and the stakeholders involved would initiate negotiations within 12 months of the commercial operation date (COD) for phase-II.

It was also decided to conclude negotiations within 45 days to finalise and sign the commercial agreement for phase-II. In case the negotiations remain unsuccessful, both parties will have the right to terminate the commercial agreement and Pakistan Railways will enjoy the right to buy back the concessionaire's assets at the net book value.

The Ministry of Railways informed the meeting that the exit clause had been examined by a negotiation committee, which met on May 25, 2025. Committee members unanimously agreed on the exit clause, which was incorporated into the draft commercial agreement. It was also highlighted that the Ministry of Law and Justice had vetted the revised draft commercial agreement.

The Ministry of Railways apprised the Cabinet Committee on Inter-Governmental Commercial Transactions (CCoIGCT) 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 on January 17, 2024 the Inter-Governmental Framework Agreement on Cooperation in the Railways Sector for investment and construction of a dedicated freight corridor including social logistics parks and rail freight terminals on the Pakistan Railways network.

It was recalled that the CCoIGCT had approved the constitution of a negotiation committee to deliberate on the draft commercial agreement along with variables and parameters for the price discovery mechanism during its meeting held on February 1, 2024. The decision of the CCoIGCT was ratified by the cabinet on February 5, 2024.

Furthermore, in a sitting of the Special Investment Facilitation Council (SIFC), held on October 28, 2024 and attended, amongst others, by DP World (a Dubai-nominated entity) and Pakistan Railways (a Pakistan-nominated entity), it was decided that the project would be executed in two phases. Therefore, as informed by the Ministry of Railways, the draft commercial agreement was based on phase-I of the project.

The railways ministry told the CCoIGCT that the negotiation committee had made recommendations for the commercial agreement, as negotiated between the parties, which may be approved by the CCoIGCT and exemptions from procurement and competition laws may be granted in accordance with Section 5 of the Inter-Governmental Commercial Transactions Act, 2022.

CCoIGCT was requested to approve the revised draft commercial agreement along with recommendations of the negotiation committee, as recorded in para-6 of the summary, to enable the Ministry of Railways to proceed further under the Inter-Governmental Commercial Transactions Act. During discussions, the railways ministry apprised the forum of compliance with the CCoIGCT decisions taken in July 2025, under which the ministry had been directed to explore domestic resources for the project and limit the timeframe for signing the commercial agreement for phase-II.

The ministry said that after extensive consultations with the stakeholders, a revised commercial agreement on the dedicated freight corridor had been drafted by incorporating the CCoIGCT's directives. The forum appreciated the efforts made by the ministry in compliance with its directives and approved the proposals contained in para-6 of the summary. The CCoIGCT considered the summary titled "Approval of Modified Draft Commercial Agreement on Dedicated Freight Corridor" and gave the green-light to the proposals.