Islamabad: Amid ongoing engagement between Pakistan and the International Monetary Fund (IMF) over a new bailout package, the government is exploring options to arrange a $6.7 billion sovereign bond to greenlight the construction of Mainline-1 (ML-1)
The Joint Cooperation Committee (JCC) under the aegis of CPEC is expected to meet on May 24. Delegations from both parties will meet on May 23. After that, the JCC will look into official permits for various projects.
A week ago, approval was scheduled for the ML-1 project. It was postponed earlier in the CDWP meeting held on May 8.
Prime Minister Shehbaz Sharif is expected to visit China next month to show Beijing’s commitment to speed up CPEC and Islamabad’s commitment to launch the second phase of CPEC. Efforts will be made to secure a financing agreement for ML-1 and provide a road map to clear China’s approximately $600 billion IPP.
Islamabad will retain the sovereign guarantee until agreed by the HPG under the terms of the EFF loan.
The Ministry of Finance has conveyed its position to the relevant forum. It was revealed that the project could be a central loan or the Finance Ministry could provide a self-guarantee for the $6.67 billion project.
There is another security project for the ML-1, which is proposed at $36 billion. The modernization of the ML-1 project must be carried out under a framework agreement and backed by sovereign guarantees.
First, Phase 1 of the project will be implemented, requiring $ 3.3 billion in equity capital. Further action in this regard was taken in accordance with the advice of the Ministry of Finance.
This requirement will be finalized after negotiations by the financing committee formed by Pakistan and China.
That the Chinese side will consider providing financial support, including loans, for this strategic project under favorable conditions. The financing scheme will be negotiated and agreed with the respective departments of both parties.
The modernized ML-1 is designed for 160 km/h, with a working speed of 120 km/h. The capacity of the existing ML-1 line will be increased from 34 to 120 trains per day and will cater for future population growth. The updated ML-1 will seamlessly combine speed, reliability and capacity in rail transport.
The passenger handling capacity of the ML-1 will increase from the current 29 million to 170 million tons, and the cargo capacity from 8 million to 43 million tons. Realistically, the proposed ML-1 upgrade will meet passenger and cargo requirements for about 25 to 30 years. The relevant ministries have some control. ML-1 PC-I does not include the size and cost of rolling stock ML-1 and security infrastructure. For security purposes, the $36 billion PC-I is not in the works. If all investment activities are combined with debt repayment, the total cost of investment is higher. With the current management structure and financial situation of the organization, it seems impractical to start the ML-1 project. Management reform, especially the financial health of the organization should be improved/corrected.
Any change in the applicable law, the procedure should be initiated by the Ministry of Railways. The Ministry has proposed in writing that the ML-1 will be transferred to a new independent entity – the ML-1 Authority – after the renewal of the ML-1 in accordance with the proposed governance structure. Authority Account will be secured from Pakistan Railways (PR).
An RFP was floated to hire a consultant for this purpose. The consultant will soon assist the ML-1 governing body in implementing the governance structure. When contacted, a spokesperson of the Ministry of Planning said that ML-1 will be on the agenda of the next JCC meeting scheduled for May 24 this month.
