Work on $1.58 billion Karachi Circular Railway project to begin

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Practical work on the much delayed Karachi Circular Railway (KCR) project may start from September this year as the Ministry of Finance has resolved the issue of “re-lending” of around $1.58 billion by the Japanese government.
The project which was feared to be unviable under a proposed way of releasing funds to the project from Japan while facing almost an 18 per cent reduction under the head of various charges, has been saved by the ministry, sources said. The release of funds from the federal government to Karachi Urban Transport Corporation (KUTC), the vehicle for the implementation of KCR project, was feared to face a 6.8 per cent “risk rate” cut and an almost 12 per cent “interest rate” cut, making the total deduction 18 per cent from the approved fund of $1.58 billion, which could make the project unviable. However, the ministry, as it was proposed by experts, has now decided to transfer the foreign funds through Pakistan Railways (PR), a federal subject to avoid the 6.8 per cent risk rate. According to sources the technical issue was resolved in a meeting held in the ministry this month.
According to sources, after the fresh development, a Japanese team would visit the city in September to finalise the preparation to relocate the thousands of affectees of the project to a new location in Malir area. Though there was an easy way to save the huge amount as there would be no risk rate reduction if the foreign fund was managed to be transferred to KUTC through Pakistan Railways (PR), high-ups in the KUTC were reluctant to make the indirect transfer. Despite technical hindrances, the issue was unresolved for the last 18 months thus further delaying the project.
Earlier, to address the re-lending issue, a meeting was held on December 18, 2009 in Economic Affairs Division (EAD), Islamabad, which had suggested using the safe route for the transfer of funds. It was also suggested that an urgent high level meeting be organised in this regard to solve the issue without any further delay. It was suggested in the meeting that the funds would be released through the Ministry of Railway which would later issue the fund to KUTC, having on its Board-Directors the senior officials of PR, Government of Sindh and City District Government Karachi (CDGK), they said.
The project had already gone through different studies like Environmental Impact Assessment Study (EIAS), resettlement action plan etc. under the aegis of Japan External Trade Organization (JETRO). It is to mention here that the KCR project, initiated to mitigate traffic problems in the metropolis, was to be funded by the Government of Japan through the Japan Bank of International Cooperation (JBIC). Tokyo has commissioned 100 per cent funding for the project under “STEP Loan” at 0.2 per cent markup rate for a 40-year payback time, including a 10-year grace period.

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