Internal rifts emerge over approval of $6.7 billion ML-I project

Islamabad:

The planning ministry has refuted Pakistan’s foreign ministry’s statement on the $6.7 billion China-Pakistan Economic Corridor (CPEC) Mainline-I (ML-I) project, claiming that the National Economic Council Executive Committee (ECNEC) did not delay approving the system last week.

In a highly unusual move, the Ministry of Planning disputed the official statement issued by the Ministry of External Affairs after the ECNEC meeting. Deputy Prime Minister and Foreign Minister Ishaq Dar chaired the ECNEC meeting last week.

“To clarify, ECNEC has not postponed the approval of ML-1 project under CPEC,” Planning Minister Ahsan Iqbal’s office said. The release added that there is a misunderstanding regarding ECNEC’s decision on the ML-1 project.

Last Saturday, the Ministry of External Affairs said that “ECNEC has not cleared the re-amended PC-I for ML-I upgradation and has advised Pakistan Railways to consider preparing smaller projects and packages for funding and implementation.” The planning ministry’s decision to publicly disavow the foreign ministry’s statement on a highly sensitive issue suggests internal rifts in the ruling party.

Unlike in the past when the ECNEC was chaired by the finance minister, Prime Minister Shehbaz Sharif retained the chairmanship and appointed Foreign Minister Ishaq Dar as his deputy chairman. Dar chaired the ECNEC meeting in the absence of the Prime Minister.

ECNEC is mandated to approve major development projects worth over Rs 7.5 billion. The revised cost of the ML-I project is $6.7 billion or Rs 1.9 trillion. The project is considered strategically important and Pakistan has sought a soft loan from China for its completion.

The ML-I project faced delays of more than five years due to Pakistan’s high debt. Pakistan has requested a loan equal to 85% of the project cost from China. However, Chinese authorities have yet to agree on the soft loan and the terms of the deal remain under discussion. Pakistan urges China to start the bidding process for the ML-I project and hold the joint financing committee meeting to finalize the terms of the loan. Internal confusion may undermine these efforts, Pakistani sources said.

The Ministry of Planning clarified that Pakistan’s Prime Minister and President Xi Jinping agreed to advance the ML-1 project in phases during a recent meeting in Beijing. Consequently, the ECNEC directed the Ministry of Railways to resubmit its PC-I for Phase-1, covering the Karachi-Multan section, as agreed by the leadership of the two countries. The amended PC-I will be presented in the next ECNEC meeting, the ministry said.

Earlier, the planning committee had rated the ML-I project as “non-viable” due to cost-cutting that led to major changes in its design and scope. Beijing had previously requested that the cost of the project be cut by a third to $6.7 billion, which planning commission officials said made the project unviable. As reasons, the Commission cited compromises on speed limits, line capacity, rolling stock, axle load and the deletion of the fencing plan.

The original ML-I line was 1,872 km long, but the Ministry of Railways is now proposing to restore a 1,726 km long line. At a meeting of the Central Development Working Group that approved the project for consideration by the ECNEC, the Ministry of Finance noted that the project conflicts with the objectives of the next loan program of the International Monetary Fund (IMF).