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Lahore Metro System: Punjab govt deviates from `austerity track`

LAHORE, May 22: The Lahore Metro System agreement signed between the Punjab government and a Chinese firm is costlier than the similar plan made by the previous government, say officials and technical experts.

The PML-N government had rejected the previous plan for which the Asian Development Bank had committed a soft loan of $1 billion on many `grounds`. One of them was that the modern facility in Lahore will create envy among the people of other cities in the province.

The officials and experts question whether the government has now made some arrangement under which this expected `envy` will not be generated by the metro by the Chinese firm which they claim has no experience of the subject.

The experts and the officials talked to Dawn on the condition of anonymity and raised many objections to the project.

According to them, the agreement has been signed with a single source which they allege has no experience of laying and running metro. An international competition would have given better cost and access to superior technology.

The company supposed to provide the facility has no previous experience in the field and the project is likely to end up being sub-contracted, they say.

The government is saying that the Chinese company is ready to provide a facility at the green line at a cost of $1.87 billion which look costly. The green line runs from Hamza Town, Shahdara to Kot Lakhpat via Ravi Road, Bhati Chowk, Lower Mall, The Mall, Queen`s Road, Mozang Chungi and Ferozepur Road.

The previous project for the same line was estimated to cost $2.4 billion and the estimates were made on the price index of 2006. The Punjab government was to contribute $400 million in the shape of land and removal of utilities.

The Asian Development Bank was to provide an easy $1 billion infrastructure loan, also arranging foreign investment of an equal amount for the rolling stock (system and operations).

Officials and experts say that nobody has explained what will the Chinese company doing with the announced $1.87 billion. If this cost includes civil construction, rolling stock and system operations, it is likely that the authorities at the helm of affairs are going to cut corners or make compromises on quality.

The previous government was going to pick the infrastructure cost ($1 billion from the ADB). And operations would have been fairly viable on the fare and ridership. They say that as told by the Punjab government, the Chinese company will arrange a bank loan of $1.87 billion which looks costly, accepting the loan liability much bigger than the $1 billion of the ADB. This is likely to make the financial viability highly questionable.

Under the previous arrangements, the government was not required to pay any subsidy because of the foreign investment of $1 billion for systems and operations.

Now there is an express loan of $1.87 billion without any private-sector investment for the operations and systems. Therefore, the experts and official fear the government will have to provide huge operational subsidies.

But, they say, one should keep in mind that many medium rails (metros) have failed because the operational subsidies are cumbersome and difficult to sustain. The facilities flopped in Bangkok, Manila and Kuala Lumpur due to the same reason.

Officials and experts say the redesigning of the Kalma Chowk is going to create a major problem for the metro project because it has been started without any detailed study and assessing its economic rate of return.

The metro, as per the disclosures by the government, will run underground from Ferozepur Road (near Kalma Chowk) to Ravi Road. But the redesigning would require deeper digging at Kalma Chowk and make going underground from near the General Hospital bridge, increasing the cost manifold.

Lahore Metro System: Punjab govt deviates from `austerity track`
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Lahore Metro System: Punjab govt deviates from `austerity track`
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Atif Iqbal from eProperty®