The approval for the up-gradation of railway Mainline (ML-1) has again been delayed. The project is the only strategic scheme of China-Pakistan Economic Corridor (CPEC). The hindrance in the approval of the project and it subsequent implementation is the big differential in the cost estimates worked out by China and Pakistan. Beijing tagged the cost of Phase-1 of the scheme at $ 4 billion which is $ 627 million higher than Pakistan’s estimate.
The difference over the cost of Ml-1project of Pakistan Railway has blocked the approval of Chinese loans at the interest of 3 percent, which the Ministry of Planning claims to be concessionary. But the fact is that global lending agencies like World Bank and Asian Development Bank gives project loans at less than 2 percent mark-up. Moreover, the Chinese banks frequently revise upwards the interest rates of loans that they give to Pakistan. If the terms of financing for certain roads and energy projects are any guide then the claim of concessionary loans is not tenable. The contracts awarded so far to Chinese construction companies for CPEC related projects lack the principle of transparency as China does not like fair competition among the reputed companies from a number of countries and insist for bidding between the Chinese companies alone. The incumbent government is then compelled to give contracts to Chinese companies in violation of Public Procurement Regulatory Authority (PPRA) rules.
According to the framework agreement of Ml-1, China will provide 85 percent of the project cost in the form of loans. The details that reflect the conditions about the rate of interest and payment liabilities have not been revealed by neither Ministry of Planning, nor by the Ministries of Finance and Economic affairs. The Ministry of Railway is reluctant to directly acquire loans of billions of dollars beyond its payback capacity. It wants the central government to obtain loans for this project, which will not only make it part of external debt but will also shift the debt servicing liability to the federal government. The contention of Railway Ministry is justified. In 2016, its losses were Rs 28 billions whereas the figures of 2017 are yet to be calculated.
Initially the cost of the project, having a length of 1872 kilometers, had been calculated at $ 8.2 billion. But the government subsequently decided to split the project due to its high cost and the work of expansion and refurbishment of the main rail line. Now the government wants to construct 748 kilometers railway track under phase-1 of the project for which the Railway Ministry has submitted a PC-1 to the Planning Ministry. Up- gradation of Peshawar-Lahore railway track has been excluded and adjustments in distance have also been made in the phase-1 that encompasses the railway track from Lahore to Karachi. Another interesting fact about Ml-1 is that the scope of work in phase-1 under the new PC-1 has been reduced by 56 percent but the cost has been increased by 6 percent. This may have been done on the insistence of Chinese financers.
The plan of construction of dual track of broad gage, improvement in signal system, reconstruction bridges on the track and induction of modern locomotives was worked out in 1985 but could not be implemented due to the change in the priorities of the successive governments of PPP and PML-N. A locomotive factory was established at Risalpur with the technical and financial assistance of Japan with a built in provision of manufacturing different components and parts diesel electric locomotives. But it was reduced to merely a locomotive assembling plant. Even its latest machinery was not utilized for the repair work of locomotives. The quality of locomotives imported from China is not at par in quality with the ones which were assembled from parts and components imported from Japan and Germany. The piecemeal approach towards Railway up-gradation will not produce the desired results. It needs overall modernization.