ECNEC approves $11.3 billion CPEC projects
Pakistan on Monday rushed to approve two infrastructure projects under the China-Pakistan Economic Corridor (CPEC) at a cost of more than $11.3 billion aimed at submitting them to Chinese authorities for implementation. work accelerated during the visit of Prime Minister Shehbaz Sharif.
The Executive Committee of the National Economic Council (Ecnec) has approved the $10 billion Mainline-I project of Pakistan Railways and the $1.3 billion Karachi Circular Railway project. It was an emergency meeting because no Ecnec meeting was scheduled for Monday.
The committee gave its approval “in principle” to the two projects because no research work had been done before the meeting was convened. Ecnec met a few hours before Prime Minister Shehbaz Sharif’s visit to China. Finance Minister Ishaq Dar chaired the meeting.
Ecnec has approved, in principle, a 45% increase in the cost of the ML-I project to nearly $10 billion. China had refused to provide funding at the previously approved cost of $6.8 billion, which delayed the project for years.
Recently, Planning Minister Ahsan Iqbal called on China to speed up the processing of the ML-I project, otherwise the railway’s main network would collapse within a year.
“Ecnec has reviewed and approved, in principle, the modified PC-1 of the Ministry of Railways for the upgrade of the existing Mainline-1 (ML-1) project of Pakistan Railways at a total cost of 9.85 billion, subject to cost recommendation, technical details and preferably an equity investment financial model,” a statement from the Ministry of Finance said.
Last week, the Central Development Working Group (CDWP) – the first level for approval of development megaprojects – cleared the ML-I project for final approval by Ecnec.
During the authorization of the project, CPEC’s largest program, the CDWP issued certain guidelines, which remained largely unimplemented.
The CDWP requested that a project monitoring and implementation unit be established by the Ministry of Railways to implement and monitor the project. He said the cost increase from $6.8 billion to $9.9 billion should be approved by a third-party consultant and the certified cost should be submitted by the Ministry of Railways before the presentation of a summary at Ecnec.
In addition, CDWP has given guidelines that the packaging and phasing of the project can be reviewed and intra-package adjustment can be made by the Ministry of Railways in consultation with the Chinese to make the work packages more realistic and practical.
The Ministry of Railways will also submit an updated business plan and a copy of the already prepared Pakistan Railways Strategic Plan (PRSP), he added.
It will provide a comprehensive plan for the future transformation of the existing system into an electric traction system.
However, those details remain unclear due to the decision to call an emergency meeting and approve the biggest project ever, which involves an $8.4 billion Chinese loan. Pakistan reduced China’s funding share to 85% from 90% due to Beijing’s refusal to provide up to 90% funding.
In rupees, the cost of the project amounts to 2 trillion rupees. Due to the negligence of the Pakistani government Tehreek-e-Insaf (PTI), the ML-I project was left in cold storage and as a result, its cost in rupees increased several times, Finance Minister Ishaq said on Wednesday. Dar.
The CDWP gave its approval almost two weeks before Prime Minister Shehbaz Sharif’s visit to China. The prime minister will seek approval from China’s National Railway Administration to start the bidding process for the project.
Islamabad is keen to perform the inauguration ceremony of the project on March 23, 2023.
During the Prime Minister’s visit, Pakistan will propose the signing of a joint memorandum, indicating the schedule of project milestones, according to an official from the Ministry of Planning.
Under the project, a 1,733 km long route will be rehabilitated, 482 underpasses, 53 skybridges, 130 bicycle bridges and 130 stations will be built along the route.
ML-I departs from Karachi, passes through Kotri/Hyderabad, Rohri, Multan, Lahore, Rawalpindi and ends in Peshawar.
Even the nearly $10 billion cost was underestimated, as the Ministry of Railways had used a four-month exchange rate of Rs 200 to the dollar. At the current exchange rate, the cost of the project is understated by 190 billion rupees, or about $856 million.
Ecnec also approved the Chinese-funded KCR project at a cost of 292.4 billion rupees, 44% more than the initial estimate. The cost includes a Chinese loan of 263 billion rupees, or $1.2 billion.
The last government of the PTI had approved the financing structure of the project based on the public-private partnership (PPP) mode. But the current coalition government has instead decided to take out a $1.1 billion Chinese loan to implement the project on the model of Lahore Orange Metro Line.
The project is sponsored by the government of Sindh and all the local share of the cost will be borne by the provincial government. No funding will be provided by the federal government.
Published in The Express Tribune, November 1st2022.