WEB DESK: Prime Minister Nawaz Sharif performed the ground-breaking ceremony of the Lahore-Sialkot motorway project after due process was completed a mere few hours before approval of the Executive Committee of the National Economic Council (Ecnec) chaired by Federal Finance Minister Ishaq Dar.
Different estimates of the cost of the project have been released: Ecnec estimated the project cost at Rs 45.38 billion with independent media sources claiming that Rs 1.6 billion has been earmarked as National Highway Authority’s (NHA) administrative expenses; Radio Pakistan gave total cost of the project as Rs 42.38 billion in one report and Rs 56 billion in another. The difference in cost cannot be explained away by citing different lengths of the motorway as Ecnec approved 89 kilometers at a higher cost than the 91 kilometers claimed by Radio Pakistan.
However, as noted in previous mega projects, this was not the first time the Lahore-Sialkot motorway was inaugurated. According to newspaper reports, the Sialkot-Lahore motorway was conceived by former Chief Minister Chaudhry Pervez Elahi in 2006 and its foundation stone laid by former President Pervez Musharraf in 2007. Two companies – Frontier Works Organisation (FWO) and a foreign company – were shortlisted with 2010 as project completion year. The project was shelved due to non-availability of funds.
The Sharif administration resolved the issue of funds by announcing a subsidy of Rs 23 billion – Rs 18 billion to be given under the Viability Gap Funding by the Planning, Development and Reforms Ministry through slashing funds from other projects though it is not yet known which projects would be axed and Rs 5 billion would be provided as a loan by the Ministry of Finance to NHA.
Given that the government has indicated it would not share in the revenue from this motorway the project can no longer be technically defined as a Build-Operate-Transfer (BOT) project as that would have entailed the entire cost to be borne by the contractor, in this instance FWO, with the cost recovered and profits accrued over time by allowing the contractor to operate the facility through charging a toll tax.
In this context, it comes as no surprise that the Ministry of Planning, Development and Reforms had declared the project financially unviable, which was confirmed by the NHA. However, Ecnec’s approval indicates that the Prime Minister directed Dar to overrule all objections and approve the project.
One must not doubt the intentions of the Prime Minister and his overarching objective to fuel economic growth through enhanced economic activity by large injections for physical infrastructure projects. Road building was, and remains, Nawaz Sharif’s most supported state-subsidised economic activity which, so he maintains, would not only improve connectivity within the country but also enable the country to become a regional trading hub linking East Asian countries and China to the rest of the world through the Gwadar port; and fuel employment within the country.
While the common sense of this logic is not in doubt yet the Prime Minister would be well advised to recall one of the first chapters of freshman economics which stipulates that common sense maybe nonsense in many economic decisions.
All projects must be carefully evaluated and their internal and economic rates of returns calculated to ascertain which project should be prioritised. At present, in spite of claims to the contrary, the energy sector continues to suffer from shortages and requires to be prioritized over and above road building.
And more disturbingly, a large part of our population has no access to clean drinking water, education and health facilities and provision of these facilities need to be prioritized before proceeding with road building.
Source: Business Recorder