$6.7b ML-I project ‘unviable’

Pakistan on Wednesday deferred approval of the $6.7 billion or Rs1.9 trillion worth Mainline-I (ML-I) project of the China-Pakistan Economic Corridor after finding that the reduced scope and the changed design have made the strategic project “unviable”. The Central Development Working Party (CDWP) -- the body mandated to clear the mega development scheme -- raised objections over the design, scope and financial model of the project, according to the participants of the meeting. The project approval has been deferred at a time when Planning Minister Ahsan Iqbal is already in Beijing and the Foreign Minister Ishaq Dar is planned to visit the country next week. Due to weak financial health of Pakistan, Beijing asked Pakistan to reduce the cost of the project by one-third to $6.7 billion. However, the reduction in the cost has made the project unviable, according to the officials of the Planning Commission. The meeting was informed that the project has been compromised by reducing the speed limit from 160 kilometer per hour to 120 kilometer per hour, the line capacity has been reduced by reducing the train frequency operation, rolling stock has been excluded, axle load has also been compromised and fencing has been deleted, according to the officials. It emerged during the meeting that the concept of the project and the specifications were changed and with the changes and the corresponding high cost, “the project does not seem viable”. Planning Commission Deputy Chairman Dr Jehanzeb Khan chaired the meeting and instructed the authorities concerned to review whether at the 120-kilometer per hour speed, the project was still viable. The authorities were also asked to revalidate the business plan. The definite answers have also been sought from the Ministry of Finance whether it can issue sovereign guarantees to take $5.8 billion Chinese loan for the project. If the issues are addressed, the CDWP would again consider the project for approval next Wednesday, according to the decision. The Planning Commission authorities observed that after the proposed changes in the design, the $6.8 billion or Rs1.9 trillion will be spent on merely rehabilitating the existing track. The railways is in a dilapidated condition and many fatal accidents have taken place on the ML-I track. It is the only strategically important project of CPEC, which is already falling nine years behind the schedule. With the latest changes in the overall scope of the project, reduction in speeds from 160km per hour to 120km per hour, enhanced transit time and the changes in the technical specifications like reduction in line capacity and axle load, the project has been distorted to a great extent, they added. After the removal of the fencing to save the cost, the safety of train operations will remain compromised and jeopardised for years to come, the CDWP was informed. China has declined to negotiate the loan terms until Pakistan approves the re-modified project. The ML-I project had initially been approved at $6.8 billion and then again in 2022 it was approved at $9.9 billion cost. According to the Planning Commission, initiating the ML-I project with the present governance structure and the financial state of Pakistan Railways would also be impractical. The project is proposed to be financed through foreign funding under the CPEC framework agreement at the ratio of 85:15 cost sharing between China and Pakistan. As against the earlier plan to complete projects in eight-and-a-half year, it has now been proposed to implement the scheme in two phases over nine years. The original ML-I track is 1,872 kilometer long but the Ministry of Railways has now proposed to rehabilitate the 1,726km track. In 2020, the Economic Affairs Division had formally submitted a loan application to China for a $2.4 billion loan for package-1 but Beijing never responded to Pakistan’s request. On the sidelines of 10th JCC, the National Railway Administration (NRA) of China and the Ministry of Railways reached an agreement to implement the ML-I project in a phased manner as per rationalized scope and cost. Other decisions The CDWP on Wednesday recommended three projects worth Rs126 billion to the Executive Committee of the National Economic Council (ECNEC) for approval. It recommended improvement and widening of Jaglot-Skardu Road worth Rs33.3 billion to ECNEC for further consideration. The CDWP referred reconstruction of N-5 road from Moro to Ranipur worth Rs57.3 billion to ECNEC for further consideration. The project shall be financed through special financing in the form of flood emergency loan from the Asian Development Bank amounting to $150 Million. A project related to health namely “Prime Minister’s Programme for Elimination of Hepatitis C Infection” worth Rs35.4 billion was presented in the meeting, which was referred to Eecec for further consideration. The project partners China International Development Cooperation Agency (CIDCA) and Ministry of Planning Development & Special Initiatives.

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