Pakistan: Main Line Railways project under CPEC may be shelved due to China’s disagreements over feasibility costs

“Ministry of Railways stated that PC-1 of ML-1 project was not feasible as costs were not agreeable to the Chinese side,” the sources said adding that Minister directed that Minister for Railways should be appraised of the matter and a report should be submitted to the Ministry of Planning, Development & Special Initiatives.

Under the China Pakistan Economic Corridor (CPEC), the ML-1 project of Pakistan Railways was the largest proposed infrastructure project in the country, to which the Executive Committee of the National Economic Council (ECNEC) accorded approval at an estimated cost of US$ 6.8068 billion on August 5, 2020, the reports stated further.

Pakistan railway line project, Main Line (ML-1), is hanging in the balance owing to the financial delays by Exim Bank of China.

The newly-elected Shehbaz Sharif government in Pakistan has decided to abolish the China-Pakistan Economic Corridor (CPEC) Authority after Chinese power producers shut down 1,980 megawatts of production capacity due to non-clearance of their Rs 300 billion dues.

According to Business Recorder, for the financial negotiation of loan terms with the Chinese side, a high-level Financing Committee headed by Deputy Chairman Planning Commission was formed under the directives of the Prime Minister which has convened eight meetings so far on the issue of financing of the ML-1 project.

On April 8, 2020, a proposed term sheet comprising various terms of loan was shared with the Chinese side.

However, the final terms and conditions of the loan were to be settled after due deliberations and a negotiation process between the Financing Committees of the two countries. A formal request for the loan of Package-1 amounting to the US dollar 2.435 billion was made to the Chinese side through Economic Affairs Division (EAD) on November 25, 2020.

The issue of Pakistan Railways ML-1 has been discussed at different levels in Islamabad and Beijing but both sides could not evolve a consensus on the cost of the project.

The CPEC was flawed in its very construct as Chinese loans are commercial in nature and building infrastructure on these loans is dangerous. However, Pakistan failed to understand it as in 2021 also, Pakistan owed nearly half of its external payments obligations, amounting to USD 14 billion, to Chinese commercial banks, largely for CPEC projects.