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Pakistan to ask China to move towards ML-1 project bidding

October 14, 2022

ISLAMABAD: Pakistan will ask China in the upcoming Joint Coordination Committee (JCC) meeting of CPEC to move towards the bidding process of the much-awaited ML-1 (Mainline-1) for the construction of a rail-line from Karachi to Peshawar.

Pakistan will also inform the Chinese side about the devastating effects of severe floods causing $32 billion to $34 billion losses with the request to find out ways and means for extending financial help in this hour of need, preferably through grants. Against the outstanding repayments of over Rs260 billion by the Chinese power producers, the government is making all-out efforts to release another tranche of the outstanding amount. While, China is asking Islamabad to resolve the issue permanently by making the revolving fund mechanism operational.

The JCC, under China-Pakistan Economic Corridor (CPEC) framework, is expected to hold a virtual meeting by the end of October. “The ML-1 is the major deliverable for the upcoming JCC, whereby Islamabad will request China to move towards the bidding process after getting approval of the revised cost of the project to the tune of $9 billion. Simultaneously, both the sides will sign a much-awaited financing agreement on Main-Line-1 (ML-1),” top official sources told The News on Thursday.

The Ministry of Planning held a preparatory meeting this week for finalising a strategy for the upcoming JCC meeting, expected to be held virtually in the last week of the ongoing month. Under the financing agreement for ML-1, Islamabad floated an idea for sharing 50:50 percent financing in US dollars and Chinese RMB. Islamabad might show a lenient attitude to extend the ratio of RMB provided the major chunk for construction of ML-1 was going to be procured from China.

Pakistan will also request to extend the repayment period for ensuring debt sustainability as a staggered time-frame for repayment of debt obligations will help Islamabad to manage debt effectively. First of all, the government will have to get approval for the revised cost of approximately $9 billion from relevant forums such as the CDWP and ECNEC.

Pakistan will request China to sign a framework agreement on Karachi Circular Railways (KCR). For flood-affected areas, the government will float ideas for projects related to drainage system, especially for Sindh, the construction of small water dams for Balochistan, and establishing an ecosystem for flood-affected areas.

There are three projects of the power sector, where the financial close could not be done, including Karrot Hydropower and the next phase of Thar Coal executed through Shanghai Electric. Without financial close, the Thar Coal project will not be connected to the national grid till next summer season. In the preparatory meeting for the next JCC meeting, the Power Division recommended abandoning the much-delayed power project through imported coal at Gwadar for producing 300MW of electricity.

The Gwadar Power Station was a proposed 300MW coal-fired power plant in Balochistan. It was presumed cancelled following July-2022 reports that the Power Division had decided to abandon the plant and replace it with a solar plant. The project was related to the Gwadar Port. After detailed deliberations, it has been decided that China will be asked to finance the transmission line for connecting Gwadar with the national grid. If both sides agreed, then the feasibility study will be done before moving towards installing the transmission line.

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