China-Pakistan Economic Corridor: China urged to deal ML-1 project on defence loan terms

Pakistan wants China to take the $8.2 billion Railways' Main Line project (ML-1), which is declared a strategic project under the China-Pakistan Economic Corridor (CPEC), on the same loan terms as of defence and other military related projects.

This was revealed by Secretary Railways Sikandar Sultan Raja while briefing the Senate Standing Committee on Railways which met with Muhammad Asad Ali Khan Junejo in the chair, here on Tuesday.

The secretary also revealed that the Sindh government is willing to take again the $2.6 billion Karachi Circular Railway (KCR) project with Japan International Cooperation Agency (JICA) which is offering loan at favourable terms compared to China.

The Railways director general (DG) (Planning) informed the committee that the CPEC project of Railways will consist of early harvest - ML-1 upgrade and establishment of dry port - mid-term - establishing new rail link from Gwadar to Mastung and Besima to Jacobabad and long-term, establishing new rail link from Havelian to Khunjrab (China border) - with an estimated cost of $8.2 billion in three packages in five years.

He said the first package would cost $2.248 billion while the cost of the second and third packages would be clear upon completion of preliminary design. The PC-1 for Package-1 is based on cost estimates validated by third party review consultants.

The committee expressed serious concern over the $8.2 billion cost while observing the rupee depreciation against dollar, saying the country would pay much higher price. The committee was further informed that of the $8.2 billion, major chunk would be spent on imports where the railways would pay around 33 percent duty/taxes on import.

Senator Mirza Mohammad asked whether railways minister ever raised this issue at higher level and the response from secretary was 'no'. Afridi recommended for duty/taxes exemption of railways imports. However, the committee deferred the point till next meeting for further discussion.

The upgrade project of ML-1 has been declared a strategic commercial project with loan on favourable terms as it presents a perfect business plan covering 75 percent traffic/population and 65 percent industrial areas. With the upgrade of ML-1, train speed will increase from the current 65-105 km to 120-160 km, line capacity from 34 to 171 trains each way per day, freight volumes from 6 to 35 millions tons per annum by 2025, and railway share of freight transport volume would increase from less than 4 percent to 20 percent.

Railways Divisional Superintendent (DS) Karachi, Mazhar Ali Shah informed the committee that right of way has been cleared for the KCR from encroachment and only 5 km is left which would be cleared after the project initiated. However, he said the Sindh government is fully cooperating with the railways, which will expedite the project pace.

The secretary railways informed the committee that he was not sure whether the project would be initiated under the CPEC or not, as from the meetings with the Sindh government he felt that they are keen to take the KCR project with Japan. He said that the Sindh government thinks that Japan is offering loans on favourable terms compared to China.

The member finance railways informed the committee that there is a gap of Rs 20 million per day in the railways revenue and expenditure as per the data of current fiscal year. He said the railways is generating around Rs 139 million per day revenue compared to Rs 159 million per day expenditure.

Afridi expressed serious reservations over the revenue and expenditure gap, saying that it means that the Railways is facing around Rs 6 billion deficit per month. However, the Railways officials said there are some months every year when the gap between revenue and expenditure goes widened but in later months it would improve. He further said that the Railways has projected to generate Rs 58 billion revenue in the current fiscal year compared to Rs 53 billion last year.

The committee also recommended for plying a fright train from Karachi to Torkham for transit trade, saying it would reduce the transportation cost while railways would earn more.

The Railways Ministry said at present it has neither space nor capacity to run any additional passenger or cargo train; however, it would work on the proposal in future.

Copyright Business Recorder, 2019