ML-I project: Railways should evaluate impact of huge Chinese loan: PC

The Planning Commission of Pakistan has emphasized that before granting approval to ML-I project under the China-Pakistan Economic Corridor (CPEC), Pakistan Railways should evaluate the impact of the huge Chinese loan for it on country's foreign debt.

It is in the national interest that before the Chinese loan, the terms and conditions of the loan should be finalized to evaluate impact on the country's debt in future, the Planning Commission noted in a working paper of the project and pointed out that the implementation of this project depends largely on what terms and conditions of the loan are offered by the government of China keeping in view the cash flows of the instant project become positive after 14 years and moreover, the constraint fiscal space available to fund local component i.e. GoP share.

One of the most critical decisions for the government of Pakistan is whether the loan will be a central loan (GoP) or sovereign guarantee loan (M/o Railways).

PC-I states that 10 percent of the total cost of the project shall be borne by the government of Pakistan and 90 percent shall be financed from relevant Chinese financial institutions under the CPEC framework.

The sponsoring agency, i.e. the Pakistan Railways, should clarify as to whether any firm commitment has been conveyed by the government of China through EAD for financing the instant project under CPEC based on the above sharing ratio.

The sponsoring agency should confirm whether all the above aspects have been considered and finalized by concerned agencies of the government of Pakistan and should provide details of the approval of the Framework Agreement, and whether PPRA was consulted before approval and signing of the framework agreement and if so comments of the Law Division and PPRA in this regard should be provided by the sponsoring agency, the commission stated.

The commission also noted that the sponsoring agency should confirm whether it is permissible under the set rules and procedures to conduct limited bidding between Chinese companies/consortia as stated in Article-IV of the framework agreement and should confirm that the contents of Article-IV of the framework agreement are not in violation of the Pakistan Engineering Council rules and regulations with regard to foreign contractors' operations in Pakistan. There is no mention of execution of the project in three packages as per the framework agreement. However, the instant PC-I's implementation is based on the three packages as opposed to Phase-I and Phase-II given in the framework agreement, the commission pointed out.

Moreover, sections of ML-I in Phase-I are proposed to be taken up under Package 2; Package-3 and sections that were under Phase-II are now proposed under Package-1, the Commission identified and noted that this amendment in priority of the sections is not reflected in the framework agreement. Then, the sponsoring agency should justify the validity of the framework agreement to execute this project through limited bidding, seeking exemption from PPRA rules.