P3A Board approves Sukkur-Hyderabad Motorway, Karachi Circular Railway projects

Dated : 31 March 2022

The Public Private Partnership Authority (P3A) Board has approved the Public Private Partnership (PPP) Agreement for the construction of Sukkur-Hyderabad Motorway (M6) and gave nod to the Project Proposal of ‘Development & Operation of Karachi Circular Railway (KCR) which was earlier presented before the ECNEC for approval.

The projects were approved in a 22nd meeting of P3A Board chaired by Deputy Chairmanship Planning Commission, Dr Mohammad Jehanzeb Khan which was attended by Secretary PD&SI, Abdul Aziz Uqaili, Secretary Finance Division, Hamed Yaqoob Sheikh, Chairman NHA, Retired Caption Muhammad Khurram Agha, Chief Executive Officer CEO, P3A Malik Ahmad Khan, Members Private Sector Development, Asim Saeed, Akbar Ayub Khan and others.

Last month, the P3A Board had approved the Project Proposal of the successful bidder for construction of M-6 Project on PPP basis at a cost of Rs 307 billion.

M-6 is 306 KM 6-lane green-field facility proposed to be built on
Build-Operate-Transfer (BOT) basis. The Project concession period is 25 years including 30 months’ construction period and 6 months’ financial close period.

M-6 is the only missing link in the north-south motorway network starting from the port city of Karachi, traversing the provinces of Sindh & Punjab and finally terminating in Peshawar.
After the completion the commuters would be able to travel from Karachi to upcountry via motorway.

The Project is expected to harness unprecedented economic benefits in terms of time savings, saving in the accidents, vehicle operating cost savings and job creation.
Per the transaction structure approved by the P3A Board, the government is only liable to pay capital VGF of Rs 9.5 billion during the construction period
as opposed to Rs 92 billion as originally projected, while the remaining cost of the Project will be financed by the concessionaire through its own resources and toll income earned during construction.

The Project is expected to fetch guaranteed Rs 408 billion in the form of revenue share for the National Highway Authority (NHA) and Rs 918 billion in the form corporate taxes for the Government.

The approval of PPP Agreement by the Board will be followed by the signing of the PPP Agreement between the concessionaire and the NHA.

Besides, the Project Proposal of the KCR Project which was earlier approved by the P3A Board was sent to the ECNEC for its consideration and approval.

The ECNEC has approved the Project at a cost of Rs 201 billion.

KCR envisages construction of 43-km modern mass urban rail transit Project proposed to be built on PPP basis. The Project is anticipated to revamp public transportation system of the metropolitan city of Karachi. KCR would deploy use of electric trains to be operating 17 hours a day and 7 days a week. The Project is expected to accommodate ridership of over 450,000 passengers a day which is expected to soar to 1 million passengers a day by the end of concession period.
KCR is expected to be awarded as a single-package PPP contract whereby the concessionaire would be responsible to construct civil works; procure electrical & mechanical component; and operate the Project for concession period of 33 years including 3 years construction period.

The government, in order to make the project commercially viable for the private investors and enhance its bankability prospects, will offer capital VGF to the tune of Rs 86.5 billion along Forex Cover for construction period and Minimum Revenue Guarantee & Inflation Cover for the first 5 operational years of the Project. Moreover, the concessionaire will also be given a right to exploit real-estate potential of the KCR stations along the corridor.

The economic benefits of the Project are exceptional in terms of saving vehicle operating costs, time savings, reduction in the carbon emissions and job creation.

The Project will be transferred to the GoP/ Pakistan Railways, at no cost, at the end of the concession period.

The Board also gave approval to the amendments in the P3A Process Flow Regulations to make them streamline with the GoP’s approval processes for the development projects.

The chair while highlighting the importance of the two projects said ‘the two projects are important part of the Sindh Development Package which has been formed and put into implementation by the incumbent Government to uplift socio-economic development in the region’.