Govt asked to slow down work on ML-I financing deal

The Economic Affairs Division (EAD) has recommended caution in finalizing a financing agreement for the China-Pakistan Economic Corridor (CPEC) Mainline-I (ML-I) project, a nearly $6 billion Chinese loan. This suggestion aims to avoid complications in the project’s implementation. The advice comes amid objections from the deputy chairman of the Planning Commission regarding the revision of the project cost without seeking approval from the commission. The ML-I project’s cost is reduced to $6.67 billion, and Pakistan expects 85% of the funding as a Chinese loan.

The EAD officials oppose finalizing financing terms before completing other project requirements. They recommend arranging bidding for the contract award to a Chinese firm first, followed by signing a commercial deal and then finalizing the financing agreement. This approach is aimed at avoiding issues encountered in the past when financing terms were finalized before the commercial contract, leading to problems from the audit department.

The railways ministry officials informed the Planning Commission that a recent Chinese delegation sought more clarity on ML-I financing and demanded information on tax exemptions. While Pakistan assured China of extending concessions and exemptions available to other CPEC projects, Beijing raised concerns about a new withholding tax. EAD officials advise patience and suggest completing other contract details before finalizing financing terms.

China is reluctant to start the tendering process until financing terms are settled, and it wants these policy decisions embedded in bidding documents. The groundbreaking of the ML-I project is announced for early next year, and it will be completed in two phases. The first phase involves laying a 932-kilometer rail track from Karachi to Multan, and the next phase covers a 796-kilometer track from Multan to Peshawar. The project’s scope and cost were recently reduced, prompting objections from the deputy chairman of the Planning Commission, emphasizing the need for proper approval processes.