ML-I project cost likely to be cut.

ISLAMABAD -- Beijing and Islamabad are in discussions for a cut in the cost of the strategic Mainline-I project of the China-Pakistan Economic Corridor (CPEC) by $3.2 billion to $6.7 billion through a reduction in scope and design aimed at making it a commercially viable scheme.

The discussions took place in Beijing last month during meetings of the Joint Working Group (JWG) on transport, highly placed sources told The Express Tribune. JWGs are the second tier of decision-making forums in the three-tier CPEC institutional arrangement.

Sources said that compared to the approved cost of $9.9 billion for the largest and strategically important CPEC project, there was a proposal to slash the cost to $6.7 billion.

However, the final cost would be subject to the revised design on which Chinese experts are currently working. 'We hope to receive the revised project design by the end of this month,' said an official working in the Ministry of Railways.

The financing plan for the ML-I project will be discussed by both sides after an agreement on the revised design. The in-principle understanding is that China will provide 85% of the project cost in the shape of loan while Pakistan will arrange the remaining amount.

Read 'Work on ML-1 railway line project to start this year'

Two years ago, China termed financing for the ML-I project riskier due to Pakistan's unsustainable external debt situation. The debt situation has further deteriorated.

The International Monetary Fund (IMF) has also placed an upper ceiling on the sovereign guarantees that Pakistan can issue to its state-owned enterprises. The country has already exhausted the limit of Rs4 trillion and there is no space left for giving any major guarantees.

The railways secretary did not respond to a request for comments.

Sources said that the cost was proposed to be rationalised by reducing the scope and changing the design of the scheme. The under-consideration revised plan includes reducing the rail speed to 120 kilometre per hour from an earlier approved 160 km, according to the sources.

This would help save significant cost and as a result the first phase of Karachi-Lahore track could be constructed with $2.7 billion, they added.

However, it was not clear whether any agreement was reached during the JWG meeting. The cost of second phase is estimated at $2.6 billion and that of third phase could be around $1.4 billion.

The rail track portions that had been recently revamped would not get any...