ML-1 from Karachi to Peshawar: Project will be part of JCC meeting agenda

ISLAMABAD: Pakistan and China have so far remained unable to narrow down their differences over estimated cost of much-awaited construction of Mainline-1 (ML-1) rail line from Karachi to Peshawar, however, this multibillion-dollar project will be part of agenda of upcoming Joint Coordination Committee (JCC) meeting.

The JCC, under China Pakistan Economic Corridor (CPEC), is scheduled to hold a virtual meeting on July 16, 2021 and financing of ML-1 will be part of the agenda of the meeting.

Pakistan’s approving forums, including Central Development Working Party (CDWP) and Executive Committee of National Economic Council (ECNEC), had granted approval of ML-1 at estimated cost of $7.2 billion, however, the Chinese side had worked out its cost hovering over $9.2 to $9.5 billion, indicating that there was a gap of over $2 billion in the estimation cost of this seven to eight years project.

“The Chinese side wants revision in the cost of the project prior to finalising the financing agreement between the two sides but Pakistani negotiators will argue that first of all bidding of the project should be accomplished and if need arises, the cost of the project will be adjusted upward accordingly,” top official sources confirmed to The News here on Monday.

The cost of financing, according to the sources, is another bone of contention between the two sides as average high cost of the projects executed under the China Pakistan Economic Corridor (CPEC) was hovering in the range of 2.4 percent. The Pakistani side has argued that the ML-1 would cost multi-billion dollars ranging from $7.2 to $9.5 billion, so Islamabad should be given a highly favourable mark-up for execution of this project. This financing cost of 2.4 percent does not include insurance cost because if it is incorporated, then the overall cost escalates. “The Pakistani negotiators want to fix the mark up rate in the range of 2 percent, so let’s see where both sides finally evolve consensus,” said the official sources.

The official shared the background of financing agreement on the Orange Line Train constructed in Lahore and stated that there was a difference in estimation of $500 million between the Punjab government and the Chinese side. China had estimated the cost of $2.1 billion while NESPAK had estimated the cost of Orange Line Train in the range of $1.6 billion. This controversy lingered on for one year and finally the Chinese side found a solution that cost of civil work, which was bone of contention, should be excluded from the scope of the project, so the government had to bear its cost. This cost of civil work was accomplished by utilising $800 million instead of $500 million, so the Chinese side proved correct in cost estimation.

For ML-1, it is hoped that both sides would work out a solution as bidding should be accomplished and then the cost could be revised upward/re-adjusted accordingly.

According to an official announcement by the Ministry of Planning, the Ambassador of the People's Republic of China, Nong Rong, called on Minister for Planning, Development & Special Initiatives Asad Umar in Islamabad on Monday. Matters relating to the upcoming 10th JCC, Joint Working Group (JWG) meetings and economic cooperation between the two countries came under discussion in the meeting. The secretary Planning and Chairman CPEC Authority also participated in the meeting.

The minister expressed his satisfaction over the progress and work done by the Joint Working Groups (JWG) and said the CPEC projects' pace of implementation would be further accelerated in the weeks and months to come. He said the establishment and operationalisation of the Special Economic Zones is currently among the top priorities. The SEZs would enable setting up of joint ventures in manufacturing that would integrate the enterprises from both sides.

The ambassador said that the JCC would provide an opportunity to give further boost to bilateral cooperation under the CPEC umbrella.

He said that the upcoming meeting would also open many new avenues of cooperation.