FWO seeks to build ML-I Multan-Rohri track

FWO has given a proposal to construct the Multan-Rohri section of ML-I under the build-lease-transfer model but the project would not be funded from the Public Sector Development Programme (PSDP), said Planning Minister Ahsan Iqbal while talking to The Express Tribune after a meeting.

Iqbal chaired the meeting on financing the ML-I Rohri-Multan project, which was attended by senior officials from the Ministry of Finance, Ministry of Railways, Ministry of Economic Affairs, Special Investment Facilitation Council (SIFC) and Ministry of Planning.

Under the construction model, the FWO will complete the rail link in three years by borrowing a maximum 80% of the cost from local banks and securing at least 20% financing from the federal government as the viability gap funding (VGF).

FWO will then hand over the track to Pakistan Railways on a lease of 25 years and transfer the title after expiry of the lease period. The total project cost is Rs470 billion. However, there were issues regarding who would repay the debt and the quantum of sovereign guarantees that the finance ministry may have to issue, discussions.

They said that Pakistan Railways was reluctant to take full responsibility of debt repayments that FWO would raise from local banks.

The Ministry of Finance did not give its clear consent for providing guarantees and instead asked Pakistan Railways to clarify how much of the debt it could repay from its own resources after taking over the new track, said the officials. These two issues also arose during discussions with Chinese authorities a few years ago.

Responding to a question, Ahsan Iqbal said that the federal government would not provide any viability gap funding from the PSDP and there could be other ways to provide such grants.

A proposal was also floated during the meeting to arrange funding under the National Economic Initiative, meant to finance megaprojects of strategic national importance by taking grants from provinces, said the officials. A senior SIFC official said that it was decided to build the rail track on the build-lease-transfer model and the only remaining decision was about the financing model.

He said that the lease would be for 25 years. The ML-I track, starting from Peshawar and ending in Karachi, was part of the China-Pakistan Economic Corridor (CPEC). However, China later refused to fund the project after its cost soared to $10 billion, fearing Pakistan may find it difficult to give $8 billion in loans.

After Beijing's refusal, Pakistan is already negotiating with the Asian Development Bank for a $1.2 billion loan to construct the Karachi-Rohri section at a cost of $2.5 billion. For the next Rohri-Multan section, the government is now exploring local options with FWO as the contractor and financing to be arranged from local banks.

A cost of Rs91 billion to Rs182 billion will be provided in grants by the federal government. During Wednesday's meeting, the Public Private Partnership Authority presented a report on the viability of various financing options.

Ahsan Iqbal observed that an appropriate path must be found for the speedy completion of ML-I as PSDP resources were already short for the ongoing projects. He stated that when resources were not available for the ongoing projects, how could new projects be financed.

Instead of the PSDP, he added, the Ministry of Railways and the Ministry of Finance should present workable alternative financing options.

Last month, Prime Minister Shehbaz Sharif instructed the Ministry of Railways to provide a comprehensive assessment of rolling stock requirements and the existing and future business potential of the ML-I project, including the passenger and freight operations, traffic and revenue potential.