PC asks for placing scope of much-needed ML-1 project

MehBy tab Haider

ISLAMABAD: The Planning Commission has asked for placing regulatory oversight and third party validation over price, specification and scope of much needed Mainline (ML-1) project with estimated cost of $8.2 billion for up-gradation of railway line from Peshawar to Karachi under China Pakistan Economic Corridor (CPEC).

The Planning Commission also recommended to the government for offering Chinese on a funding model with a built in investment or equity component where the project can be operated under a PPP/BoT (Built-Operate and Transfer) mode.

The Planning Commission has made several observations before granting approval to ML-1 project at the forum of Central Development Working Party (CDWP) and now the response given by Ministry of Railways will be made part at time of presenting PC-1 before the Executive Committee of National Economic Council (ECNEC) probably after installation of elected government after coming into power after July 25 elections.

According to official documents available with The News stating that on the one hand, the programme (and not just the instant PC-1) is supported in the greater interest of the Pakistan Railways and for the greater public good, on the other hand, it is imperative that we commit to the programme only after the most comprehensive due diligence and analysis such, the progress may only be presented to ECNEC after a clear way forward on the following issue.

A) Regulatory Oversight and Management: The recommendation of the newly developed Railway Strategic master plan, including management and regulatory changes should be adopted prior to launching the ML-1 programme.

ii. A railway Regulatory Authority be set up as an independent watch dog and the PR to be restricted.

iii. In the absence of a functioning regulatory and oversight body in the rail sector, a national level body be set up with ownership at the cabinet level, with internationally recognised management, financial and railway professional as advisers to steer the project.

iv. The 3rd party review must certify not just the price and specification but also the scope and the

underlying principles driving the project programme and project design.

v. Railway professional be inducted under the newly notified technical pay scales to manage the programme with clear performance accountability.

vi. We should consider setting up the ML-1 corporation as a separate company under Pakistan Railways whereby the assets and current staff (including or excluding contingent liabilities) of the ML-1 should be transferred to the new entity; since ML-1 represents 80% of the traffic and revenue of the PR, this new entity could potentially have a clean and bankable balance sheet

B) Price, Financial and Operating Model:-

i. A new section should be identified, supplementary to the existing ML-1 that can either be offered to the ADB for financing or funded from within the current PR IBC under International Competitive Bidding to set a price benchmark for a scope similar to the instant PC-1

ii. The Chinese should be offered a funding model with a built in investment or equity component where the project can be operated under a PPP/BoT mode.

iii. The interest on the debt portion of the project should be competitive with other avenues of financing currently available to the GoP (i.e. JICA, ADB etc.)

iv. The project may only be presented to the ECNEC/Cabinet and approved after scope and price are firmed up and no further agreements be signed with the Chinese side unless all outstanding issues are resolved (since there is no bidding process under the current framework).

When contacted to top official of Pakistan Railways here on Friday, he said that they responded to these observation during the proceedings of the CDWP meeting held during last few days the tenure of the previous PML-N led regime but so far they had not received official minutes of the meeting. They said that the ECNEC was expected to meet after July 25 general elections in the country.